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Time of India
15-07-2025
- Business
- Time of India
Vedanta shares in focus as Viceroy criticizes AGM, InGovern defends Group structure
Shares of Anil Agarwal-led Vedanta are expected to remain in focus on Tuesday following fresh criticism from US-based short-seller Viceroy Research regarding the company's annual general meeting (AGM), even as proxy advisory firm InGovern defended Vedanta's corporate structure. Viceroy Research criticised Vedanta's recently held AGM, calling it a 'stage-managed' event that, according to the firm, neither encouraged nor meaningfully addressed investor questions. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like 나를 빛나게 해줄 예쁜 마음, 예쁜 팔찌 유니세프 지금 기부하기 Undo The short-seller highlighted that of the roughly 20 callers during the AGM, only three posed actual questions, while the rest reportedly delivered long speeches praising Vedanta chairman Anil Agarwal . Viceroy also noted that one caller who raised questions on topics such as brand fees, capex spending, and related-party transactions appeared to have been included only due to an apparent oversight. Viceroy had previously emphasized that London-based Vedanta Resources, the holding company of Vedanta Ltd, is entirely reliant on cash flows from its India-listed subsidiary, raising concerns about the group's financial structure. Live Events In response to the criticism, proxy advisory firm InGovern defended Vedanta's holding structure, stating that such frameworks are common in capital-intensive sectors such as infrastructure, natural resources, and utilities. InGovern cited companies like the Adani Group, Tata Group, and Reliance Industries , as well as global firms Glencore and Anglo American, as examples of similar structures. The firm noted that holding companies using cash flows from subsidiaries is both legitimate and standard practice in these industries. InGovern also issued a cautionary note regarding short-seller reports, stating that such reports often reflect the financial interests of their authors and may present negative interpretations of public data. The firm advised investors to view these reports as just one perspective among many, particularly since short-seller reports are known to trigger sharp volatility in stock prices. Furthermore, InGovern flagged regulatory inconsistencies, noting that while Sebi mandates registration for domestic entities and individuals publishing research on Indian securities, foreign firms like Viceroy can release reports on Indian companies without regulatory scrutiny. The firm cited instances where offshore research entities have published critical reports without responding to regulatory summons or cooperating with Indian authorities. Vedanta shares closed 1.3% higher at Rs 448.25 on BSE on Monday. Also read: Lack of short selling in Indian markets causing potential market distortions: Zerodha's Nithin Kamath ( Disclaimer : Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times)
Time of India
14-07-2025
- Business
- Time of India
Foreign short-sellers trigger stock crashes in India with critical reports, and profit from them, reveals report
Proxy firm InGovern has released a report outlining the modus operandi of certain foreign short-sellers who start taking positions in target companies and make gains from the fall in their stock price once the report is released. "Foreign research outfits not registered with Sebi can publish reports on Indian companies without being subject to Indian regulatory scrutiny -- even when their actions directly impact Indian investors and markets," it said. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Bank Owned Properties For Sale In Duong Detham (Prices May Surprise You) Foreclosed Homes | Search ads Search Now Undo The report came in the backdrop of US-based Viceroy Research calling billionaire Anil Agarwal-led British firm Vedanta Resources a "parasite" that is "systematically draining" its Indian unit, an allegation which the group called "selective misinformation and baseless" aimed at discrediting it. InGovern said short seller reports have become significant market events, often resulting in heightened volatility and intense scrutiny of targeted companies. These firms first establish a short position in the securities of a company, which is followed by publishing a critical or adverse research report. The report often triggers market reactions, sometimes bordering on panic. Short sellers benefit financially from subsequent movements in stock or bond prices. Live Events In India, the Securities and Exchange Board of India (Sebi) has established a regulatory framework for research analysts. Entities and individuals who publish research on Indian securities are required to be registered with the regulator, ensuring a degree of accountability and oversight regarding the quality and intent of published research. "These regulations are designed to protect investor interests and promote market integrity by holding registered analysts to professional and ethical standards," InGovern said. Citing recent reports against Indian groups, it said instances have emerged where offshore research firms released critical reports while holding economic interests in the securities, yet did not respond to regulatory summons or cooperate with Indian authorities. The reference was to another US short seller, Hindenburg Research, which in January 2023 released a damning report against the Adani Group. Hindenburg, which has since shut shop, did not respond to summons issued by Sebi. "Indian regulators can enforce compliance and accountability among domestic research analysts, but have limited recourse against unregulated foreign entities. This creates a regulatory gap, allowing such firms to influence Indian markets without adhering to the same standards of transparency," InGovern said. "The accuracy of these reports is often debated, but the incentive structure -- where financial gains are tied to negative market outcomes-- raises concerns about motives, with market disruption sometimes prioritised over balanced analysis." Calling for a need for stronger safeguards, it said these dynamics highlight the importance of ongoing dialogue around disclosure norms, cross-border regulatory cooperation, and enhanced investor education as global capital markets become increasingly interconnected. InGovern has said that as an independent proxy advisory firm, it has made recommendations in the past for supporting and opposing various resolutions at Vedanta Group companies, depending on the nature of the proposal and the prevailing governance standards. "Routine resolutions such as adoption of financial statements or reappointment of auditors have generally received support when disclosures and processes met regulatory and best-practice standards," it said. On the proposed demerger of Vedanta, InGovern has noted that it was supported by leading proxy advisory firms (including InGovern) all of whom recommended a vote in favour of the demerger. "These advisors cited potential benefits such as enhanced management focus, improved capital market access, and the opportunity for investors to hold shares in businesses with distinct investment profiles. The demerger is designed to unlock value, sharper strategic focus for each business, and provide flexibility for future growth and collaboration with investors and partners, including the possibility of sale of any of the demerged entities," InGovern said. On the Viceroy report's observations on entity structures, InGovern has stated that such structures are quite common and legitimate. "Infrastructure, mining, and energy businesses require large upfront investments and often operate through holding company structures for regulatory, tax, and operational reasons," it said, adding that parent companies often raise debt at the group level (sometimes at more favourable rates) and use subsidiary cash flows for servicing, which is disclosed and regulated. "This model is not unique to India -- most large conglomerates globally use similar structures, as seen with Glencore, Anglo American, and BHP," it said. InGovern has also highlighted how various regulatory norms in India require ample disclosures for companies, which helps provide information to stakeholders. "Indian regulations (SEBI, Companies Act) require comprehensive disclosure of related-party transactions, inter-corporate loans, and dividend flows." Vedanta Group had denied the claims in the Viceroy Report, stating that the report is a malicious combination of selective misinformation and baseless allegations to discredit the Group.
Hans India
12-07-2025
- Business
- Hans India
JP Morgan remains upbeat about Vedanta
New Delhi: A day after US short-seller Viceroy Research called Anil Agarwal-led British firm Vedanta Resources a 'parasite' that is 'systematically draining' its Indian unit, global investment banker JP Morgan said it is not going to be distracted by the claims and maintains its 'overweight' rating on the company and its bonds. In a note titled 'Vedanta Resources: Not getting distracted; stay long', JP Morgan on Thursday said it remains comfortable with Vedanta's leverage position and government's oversight of Hindustan Zinc, an arm of Vedanta Ltd. 'We have generally focussed on Vedanta Ltd's cash flows and earnings excluding Hindustan Zinc to unravel the key drivers of the credit. VDL (ex-HZL) reported EBITDA of USD 3.1 billion in FY25 and a net leverage of 2.2x. We struggle to see financial stress at VDL with these metrics. For HZL, net leverage was 0.1x. HZL has capex plans and we see net leverage going up to 0.5x,' the note said. Vedanta is cheap within the Asian and emerging market metals and mining space supported by healthy EBITDA generation, improved funding access with approximately $1 billion bank loans raised by Vedanta Resources in FY26, and attractive yields, it added.
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Business Standard
11-07-2025
- Business
- Business Standard
JP Morgan backs Vedanta after Viceroy report, says "not getting distracted"
Analysts at JP Morgan believe Vedanta is cheap within the Asian and emerging market (EM) metals and mining space Devanshu Singla New Delhi Listen to This Article After US-based short-seller Viceroy Research alleged that the Anil Agarwal-led Vedanta Group is "financially unsustainable and operationally compromised," global brokerage JP Morgan has backed the mining giant saying that it is not distracted by the claims and maintains its 'Overweight' rating on Vedanta and its bonds. The brokerage said that it remains comfortable with Vedanta's leverage and the government's oversight of Hindustan Zinc. Analysts at JP Morgan believe Vedanta is cheap within the Asian and emerging market (EM) metals and mining space, supported by healthy Ebitda generation ($5 billion run-rate), improved funding access (with $1 billion in bank loans raised
The Print
09-07-2025
- Business
- The Print
US short seller calls Vedanta Group a house of cards built on unsustainable debt; firm says allegation baseless
'Vedanta Resources Ltd (VRL) is a 'parasite' holding company with no significant operations of its own, propped up entirely by cash extracted from its dying 'host': Vedanta Ltd (VEDL),' Viceroy said in an 85-page report. The US firm took a short position against the debt of Vedanta Resources, the UK-based parent of Indian miner Vedanta Ltd, alleging that the group 'is a house of cards built on a foundation of unsustainable debt, looted assets, and accounting fiction.' Vedanta responded saying the report was 'a malicious combination of selective misinformation and baseless allegations' and that its authors issued it without contacting the group. New Delhi, Jul 9 (PTI) US short seller Viceroy Research on Wednesday called billionaire Anil Agarwal-led British firm Vedanta Resources a 'parasite' that is 'systematically draining' its Indian unit, an allegation which the group called as 'selective misinformation and baseless' aimed at discrediting it. VEDL has paid dividends worth Rs 75,800 crore in the last four fiscal years, while its unit Hindustan Zinc paid another Rs 57,300 crore over the same period. 56.38 per cent of the dividend payout at VEDL went to Vedanta Resources in line with its shareholding, and 61.62 per cent in Hindustan Zinc. Viceroy said VEDL has accrued USD 5.6 billion free cash flow shortfall against dividends over the last 3 years while its net debt has increased by USD 6.7 billion (around 200 per cent) since FY22. 'VEDL has depleted its cash reserves and exhausted its ability to borrow money and 'liquidate' working capital items,' it said. Conversely, over the same period, VRL's interest costs have increased by USD 200 million per year. It reported FY25 total interest costs of USD 835 million against USD 4.9 billion of gross debt implies an effective interest rate of 15.8 per cent, the report said adding this was inexplicable as the London-based company's publicly issued bonds and disclosed term loans carry rates closer to 9-11 per cent. 'We see only three possible explanations, all of which suggest a level of financial misconduct: Undisclosed, off-balance sheet debt is being serviced, with the costs disguised as interest expenses. This would be fraud. (Secondly) high-cost intra-period loans are being used and repaid before reporting dates to mask the true level of debt. (And thirdly) loan rates or conditions are materially misreported to the market,' it said. The same phenomenon is observed at VEDL, where actual interest expenses in FY25 were USD 368 million higher than its reported weighted average borrowing costs would suggest, implying significant intra-period borrowing to manage liquidity. This is supported by VEDL's precarious working capital ratio, which has been well below 1.0 since FY23, indicating its current liabilities vastly exceed its current assets. On mechanisms of cash extraction, it said VRL employs several key mechanisms to drain cash from VEDL – unsustainable dividends (VEDL's dividend policy is dictated entirely by VRL's financing needs, not by its own ability to generate cash), Artificial Brand Fees (VRL extracts hundreds of millions of dollars annually from VEDL and its subsidiaries through 'brand fees' that lack any commercial justification), VRL loans from VEDL subsidiaries. 'Our forensic investigation into Vedanta's key operating subsidiaries reveals a portfolio riddled with financially unviable assets, undisclosed liabilities, systematic fraud, and profound governance failures. The book values reported by VEDL are fiction,' the report said. It went on to cite the example of VEDL's Dubai-based subsidiary, Fujairah Gold, which it said has multiple red flags suggesting it deals in undocumented or illicit gold. 'The Vedanta Group is a house of cards built on a foundation of unsustainable debt, looted assets, and accounting fiction. The VRL financial zombie being kept alive by transfusions of cash from its subsidiary VEDL,' the report said. 'The proposed demerger will merely spread the group's insolvency across multiple, weaker entities, each burdened with a legacy of impaired assets and unserviceable debt. The structure is fundamentally broken and headed for a disorderly collapse.' VEDL plans to split different businesses into separate entities. Viceroy said it was shorting the debt stack of Vedanta Resources (VRL), the parent company and majority owner of Mumbai-listed Vedanta Ltd (VEDL), as it released the 85-page report. Shorting debt, also known as short selling of bonds, is a trading strategy where an investor looks to profit from a decline in the price of bonds or other debt instruments. It involves borrowing the bond, selling it at the current market price, and then buying it back later at a potentially lower price to return to the lender, pocketing the difference as profit. Vedanta stocks fell as much as 6 per cent following the report release but recovered some losses and closed at Rs 440.80 on the BSE, down 3.4 per cent over the previous close. Calling VRL a 'heavily indebted parent', Viceroy said, 'The entire group structure is financially unsustainable, operationally compromised, and poses a severe, under-appreciated risk to creditors'. To service its own debt burden, VRL is 'systematically draining' VEDL, forcing the operating company to take on ever-increasing leverage and deplete its cash reserves. 'This looting erodes the fundamental value of VEDL, which constitutes the primary collateral for VRL's own creditors,' the report added. Responding to the report, Vedanta in a statement said, 'The report is a malicious combination of selective misinformation and baseless allegations to discredit the Group'. 'It has been issued without making any attempt to contact us with the sole objective of creating false propaganda. It only contains a compilation of various information, which is already in the public domain, but the authors have tried to sensationalise the context to profiteer from market reaction,' it said. Alleging that some of the 'material quantitative and qualitative discrepancies' in Vedanta group could 'tantamount to fraud', Viceroy highlighted what it called the 'Bait and Switch Funding Model' where VEDL promotes ludicrous capital-intensive projects that it cannot afford in order to raise fresh capital. This capital is then paid out to the PropCo (parent company) to service its debt. Among others, it called out Vedanta's interest expenses vastly exceeding its reported note rates, evidence of inflated asset values, expenses across operating subsidiaries being systematically capitalised to artificially inflate profits and asset values, and billions of dollars of disputed expenses kept off-balance sheet and undisclosed in financial reports. 'Vedanta presents systematic governance failures across management and auditors, including inappropriate auditor choices,' it alleged. 'To cure its maladies, VRL has proposed a demerger of the entities it has rolled up through its decades-long acquisition strategy, which it now claims are more valuable individually. This fails to address the fundamental cash crunch and will saddle the resultant companies with unsustainable debts from their inception.' It goes on to term VRL 'a financial zombie' that is being kept alive by transfusions of cash from its subsidiary VEDL. The report came on a day before Agarwal, chairman of Vedanta Ltd, is to address the company's shareholders at the annual general meeting. 'The timing of the Report is suspect and could be to undermine the forthcoming corporate initiatives. Our stakeholders are discerning enough to understand such tactics,' Vedanta said. 'In fact, to avoid any responsibility, authors of the report have added various disclaimers that the Report has been prepared for educational purposes only and expresses their opinions and are not statements of fact.' Vedanta said it remains focused on the business and growth, and requested everyone to avoid speculation and unsubstantiated allegations. In response, the Viceroy Group wrote on 'X' that Vedanta has dismissed its 85-page 'thoroughly referenced' report without any attempt to disapprove their work. 'This is likely because they cannot refute our findings. We stand behind our work and are happy to take questions,' Viceroy said. The strategy to make a profit from a declining stock deployed by Viceroy is the same as that used by another US short seller Hindenburg Research in January 2023 against the Adani group. Hindenburg, which has since shut down, had called the alleged 'brazen stock manipulation and accounting fraud' by the Adani Group. While Adani group refuted the allegations, calling them 'baseless' and 'malicious', the Hindenburg report led to group stocks losing as much as USD 150 billion in value at their lowest point. In another post, Viceroy said, 'In lieu of a response: Vedanta simply has outlined details of our legal disclaimer. This is the laziest response to any report we have published in our 8+ year history'. 'We stand behind our work, and are happy to take questions,' it added. PTI ANZ MR MR This report is auto-generated from PTI news service. 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