Latest news with #ViceroyResearch
Business Upturn
10 hours ago
- Business
- Business Upturn
Vedanta faces fresh scrutiny over unapproved brand fees and potential breach of shareholder agreement with government: Report
Vedanta Limited (VEDL) and its subsidiary Hindustan Zinc Limited (HZL) have come under fresh scrutiny following two detailed reports by Viceroy Research alleging corporate governance lapses, questionable brand fee arrangements, and alleged misuse of employee welfare funds for lobbying activities. Vedanta – Zinc Twice Before You Act$HZL's unapproved brand fees carry an undisclosed termination clause, and appear to trigger an event of default and a sovereign call/put per its SHA with the Government of India. $VEDL #thread 1/ — Viceroy (@viceroyresearch) July 17, 2025 In its latest report dated July 17, 2025, Viceroy Research raised concerns over an unapproved 'brand fee' imposed by Vedanta on HZL since October 2022. According to the report, the brand fee was introduced through a contract between HZL and Vedanta Resources Limited (VRL), allegedly without approval from the Government of India (GoI), which is a minority shareholder in HZL under a shareholder agreement (SHA). The report claims this arrangement not only violates the SHA but also includes undisclosed termination clauses that could trigger an 'event of default,' allowing the government to exercise sovereign call or put options on Vedanta's stake in HZL. These options would potentially allow the GoI to either purchase Vedanta's stake at a discount or force Vedanta to buy the government's stake at a premium, exposing Vedanta to significant losses. Viceroy also flagged that the brand fees are being used as rolling credit for VRL, secured against VRL's loans, and allegedly serve more as a financing mechanism than a legitimate payment for services. The report suggests these arrangements weaken HZL's financial position while benefiting the promoter-controlled VRL. Earlier, in another report dated July 15, 2025, Viceroy Research alleged that shareholder entities Bhadram Janhit Shalika Trust (BJST) and PTC Cables Pvt Ltd (PTCC) — which it describes as undisclosed, promoter-controlled entities — have been diverting substantial employee welfare funds into political lobbying rather than employee benefits. According to the July 15 report, since FY20, BJST and its subsidiary PTCC have collectively received over ₹1,499 crore in dividends from VEDL and HZL: FY25: ₹320.35 crore FY24: ₹373.30 crore FY23: ₹701.04 crore FY22: ₹3.80 crore FY21: ₹83.59 crore FY20: ₹166.61 crore The report claims these entities have acted as hidden shareholder vehicles under the Agarwal family's control, allegedly prioritizing lobbying and influence campaigns over the stated purpose of employee welfare. Responding to these allegations, Vedanta Chairman Anil Agarwal stated on July 10, 2025: 'As far as this report has come, we are so transparent. My fundamental value is very important to remain disclosure and the transparent, and this is our strength.' Both reports highlight what Viceroy Research calls 'habitual governance failures' and urge the Government of India to take remedial action, including reclaiming allegedly misused brand fee payments and reassessing dividend payouts to BJST and PTCC. The allegations have sparked fresh debate about transparency, related-party transactions, and corporate governance at Vedanta and its subsidiaries at a time when the group faces mounting scrutiny over its debt and cash flow position. Ahmedabad Plane Crash
Time of India
20 hours ago
- Business
- Time of India
Waiting for Sebi response to queries on Vedanta, says US-based short seller Viceroy Research
Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Overweight rating Mumbai: US-based short seller Viceroy Research , which has lately published a series of reports on Vedanta Group , said it awaits a response from the Securities and Exchange Board of India Sebi ) to its queries on the metals conglomerate that has lender support for its ongoing reorganization by revenue streams."It is an opportunity for SEBI to really raise their game, how they handle this," London-based Fraser Perring , co-founder of Viceroy Research, told research firm has reached out to Sebi through email, assuring the regulator of assistance in assessing the veracity of its reports that criticized Vedanta and its proposed restructuring along business said Viceroy is yet to receive a response from the regulator."In all fairness, we only reached out to them a few days away, and I suspect they've got to get clarity," Perring has steadfastly denied all allegations, and pointed to broader regulatory and investor support for its corporate actions aimed at unlocking value embedded in the operating this week, proxy advisory firm InGovern said that foreign research firms not registered with the market regulator can publish reports on Indian companies without being subject to Indian regulatory scrutiny."Even when their actions directly impact Indian investors and markets," InGovern said, in reference to the oversight latitude enjoyed by such foreign have been instances where offshore firms have released critical reports on securities in which they hold economic interest, but did not respond to regulatory summons or cooperate with Indian authorities, InGovern its report on Wednesday, Viceroy Research has claimed that the Agarwal family, promoters of the Vedanta Group, are enjoying financing at a non-arms length from Vedanta Ltd, and its government-backed subsidiaries using parallel operating structures outside of the group, such as Serentica US-based short-seller, which has published its fifth report on the group since last week, said that Vedanta, Hindustan Zinc and BALCO 's investments in Serentica are "effectively worthless", given the way the deals have been Renewables is a green energy company owned 65% by global investment firm KKR, and the rest by Twin Star Overseas, which is owned by the Agarwal Hindustan Zinc and BALCO invested in Optionally Convertible Redeemable Preference Shares (OCRPS) issued by Serentica, which offer negligible returns (0.0001% dividend annually) and no control or upside for 30 years. The firm has described these investments as financially unviable and had published its first report on the Vedanta Group last Wednesday, terming Vedanta Resources a 'parasite' holding company, which was supported entirely by cash from its operating company firm then published questions that shareholders of Vedanta must ask the management at their annual general meeting, following it up with an analysis of the AGM, which they termed as a staged Viceroy's first report last week, shares and bonds of Vedanta have not seen a significant movement, except for a knee-jerk reaction on the day the report was released."I don't expect or encourage anyone to just react to noise. We would expect them to fact check," Perring said. "Unlike normal short sellers that publish one report and run away, we put out key themes where people can find it themselves if they want to do the said that the company had a golden opportunity to start being transparent."They have refused and as such we are going to make sure that people have the information to either make them accountable or ignore it and let the looting continue."In a report released earlier this week, BofA Securities has maintained its 'overweight' rating for three bonds of Vedanta Resources Plc, while downgrading two of its bonds to 'marketweight'. The brokerage said that the company has reduced its debt, has lower repayments over the next three years helped by its recent refinancings, and has seen a moderation in its interest cost."We are OW VEDLN 28s/ 29s/31s as bonds look cheap compared to peers. MW on 30s/33s as we see more value in 29s/31s with higher yields and lower duration," it said.
Mint
2 days ago
- Business
- Mint
Why no one blows the whistle until a short-seller turns up
The reaction to US-based short seller Viceroy Research's scathing report on the Vedanta Group was as predictable as it was performative. The company, not surprisingly, called the allegations 'baseless". There was also the familiar barrage of nationalist rhetoric summed up by former Rajya Sabha MP and BJP national executive member Swapan Dasgupta, who tweeted: 'Is there a concerted attempt by dodgy US financial organisations to undermine India's corporates/financial institutions?" But strip away the outrage, and the uncomfortable question remains: why did it take a foreign short-seller to say what no one in India's financial ecosystem had the courage or incentive to? After all, as Vedanta's CEO Deshnee Naidoo admitted, the points raised in the report are not new and have been previously disclosed to shareholders. Viceroy's dossier alleges opaque structures, questionable related-party transactions, and fragile debt positions across the sprawling Vedanta empire. You don't need to agree with every bit of the report. The key issue is that in a market ecosystem populated by regulators, exchanges, research analysts and institutional investors, why was such scrutiny absent until a short-seller showed up? The discomfiting answer is the lack of incentives. Reviled they may be, but short sellers are among the few market participants who have a genuine incentive to unearth problems inside companies. Since they make money when stock prices of their target companies fall, they are financially motivated to find what others ignore. Their motives are certainly not altruistic, but they drive the kind of transparency and accountability that almost all other market players shy away from. Take the recent Jane Street saga. The US-based high-frequency trader was eventually censured by Sebi for allegedly fraudulent and manipulative trades in index options. Sebi's action came as a surprise, but Jane Street's actions were known and discussed widely for months before the regulator's action. Shankar Sharma, Veteran investor and founder of GQuant Investech, posed the obvious question: Why did the exchange not act earlier? His answer: "Simple conflict of interest…How can they sanction JS when it drives FO volume massively, hence SE profits." That's because when you trade F&O contracts on the NSE, you are charged a small percentage of the trade value as transaction fees. Sharma's critique strikes at the core of our market structure; when exchanges benefit from the very entities they are meant to police, enforcement becomes a question of convenience rather than principle. That's why independent, profit-seeking actors like short-sellers are necessary, even if they operate in the shadows. It is no accident that some of the most explosive corporate scandals like Adani in India, Wirecard in Germany and Luckin Coffee in China, were flagged first by short-sellers. In each case, insiders maintained a studied silence till the proverbial fecal matter hit the overhead fan. In each case, external watchdogs were too slow or too compromised. The dirty work was done by someone with skin in the game and a profit motive. Of course, short-sellers can be wrong. They exaggerate, cherry-pick and even manipulate. But their work, when rooted in data and grounded in fact, performs a critical function. They are often the only ones willing to publicly accuse a company of fraud — because they have the most to gain if they're right, and the most to lose if they're wrong. Could the questions that Viceroy posed to Vedanta have been asked by its independent directors? Or its bankers? Or rating agencies? Or large institutional shareholders (foreign institutional investors (FIIs) and domestic institutional investors (DIIs) who together hold over 27% stake in Vedanta Ltd)? Possibly. But the brutal truth is that for none of them did the risk-reward trade-off make sense. The vitriol aimed at Viceroy isn't anything new. Others who've dared to say the emperor is naked, have faced far worse. In June 2012, Canada-based Veritas Investment Research called out Anil Ambani-group company Reliance Communications (RCom) for its accounting practices and corporate governance, leading to significant a drop in the company's stock price. Here's how the telco responded to the charges: 'The Veritas report lacks any credibility and is malafide in intent and approach…The report is full of factual inaccuracies, and baseless allegations masquerading as research." By 2016, RCom was desperately trying to sell assets in a bid to pay off its ₹45,000 crore of debt. In February 2019, it filed for bankruptcy. In another 2011 report, Veritas called out Kingfisher Airlines for 'poor disclosures, capricious accounting policies and understated liabilities". The company dubbed the report 'mischievous and sensational". In 2012, Kingfisher ceased operations and faced bankruptcy proceedings. As for Veritas, it was forced to wind up its business in India in 2014 after Nitin Mangal, one of its analysts, was remanded in custody for his report raising accounting and governance issues at Indiabulls Financial Services, Indiabulls Real Estate and other group firms. Markets need naysayers as much as they need Yes men and women, because uncomfortable truths often come from those with a vested interest in revealing them. Until domestic institutions are more willing, and incentivized, to speak up, we should be careful of shooting the messenger and look at the message instead.
The Hindu
6 days ago
- Business
- The Hindu
What was the premise of Viceroy Research's short of Vedanta?
The story so far: India miner Vedanta Ltd.'s (VEDL) stock slumped nearly 8% on Wednesday (July 9, 2025) after Delaware-based Viceroy Research took a short on its UK-based parent Vedanta Resources (VRL)'s debt stack. In other words, wagering that the parent would default in repaying their debt. It held the holding company to be a 'parasite' with 'no significant operations of its own' feeding on cash 'extracted' from 'host' VEDL. The short seller articulated the entire structure as 'financially unsustainable, operationally compromised' accounting for a 'severe, under-appreciated risk to creditors'. Notwithstanding the fall Wednesday, the scrip shrugging off the decline closed 0.83% higher at ₹442.60. Vedanta – Limited Resources Viceroy is short of Vedanta Resources (PropCo), the heavily indebted parent & majority owner of Vedanta Limited (NSE : VEDL). The group structure is financially unsustainable, operationally compromised, & resembles a Ponzi scheme. $VEDL 1/ — Viceroy (@viceroyresearch) July 9, 2025 What is short selling? Broadly, short-selling entails profiting from a fall in the prices of a scrip. Although it can serve many purposes, such as mitigating demand-supply imbalances in scrips and ensuring better price efficiency, among other things, it can also be potentially utilised to manipulate and drive down the prices of a scrip. Thus, prompting concerns about their intent and credibility. As a practice, it entails selling a borrowed scrip in anticipation of a downward price movement and buying it back when the lower price level is realised. Let us say, anticipating a downward movement, an individual borrows and thereafter sells 10 shares at ₹100 apiece. The total sale value is ₹1,000. The price of the share decreases to ₹85 apiece and they opt to buy the quantity back. This time it will cost them ₹850 — a direct profit of ₹150. The short seller at the centre of the current story, that is, Viceroy Research's recent shorts on U.S.-based Medical Properties Trust and Arbor Realty Trust are important to note. Bloomberg reported July last year that federal prosecutors in the U.S. were looking into the latter company's lending practices and disclosures. Details of the reported investigation have not been made public yet. Medical Properties Trust, on the other hand, mutually decided to 'settle and dismiss' a defamation lawsuit it filed against the Delaware short seller in October 2023. The terms have been kept confidential. Underlining their next move following their latest short position (against VRL), co-founder Fraser Perring told news publication NDTV Profit that it was in the process of making their submissions to SEBI referencing specific violations of law. Why is Viceroy Research calling Vedanta Resources a 'parasite'? The subject of the entire contestation is Viceroy Research's allegations that the holding company is 'systematically draining' VEDL to service its own debt load. The Delaware short seller holds the India-based unit is being forced to acquire more debt on a recurrent basis which is depleting its own cash position. The fresh capital is being raised in the guise of operational requirements entailing capital-intensive projects that it 'cannot afford'. The report adds that the alleged 'looting' erodes the fundamental value for VRL's own creditors for whom the equity stake in the Indian unit is the primary collateral. Thus, if the entity's value falls, it could potentially reverberate consequences for the parent company's ability to service debt as well. The other set of allegations hold that Vedanta Ltd.'s interest expenses, or cost of borrowing funds, vastly exceed those determined as per their reported interest rates. This continued to scale upwards notwithstanding paydowns and restructuring. For perspective, the short seller observed that the parent company's effective interest rate more than doubled from 6.4% (2021) to 15.8% in 2025 despite having trimmed their gross debt by $3.6 billion since FY 2021. Viceroy lends three potential explanations to the reported paradigm. Firstly, it apprehends that additional expenses potentially relate to an undisclosed, off-balance sheet debts (that is, a debt not enumerated in a company's balance sheets) or a similar financial obligation, enumerated as expenses in the balance sheet. The other apprehension holds that intra-period loans entailing higher costs of borrowing are being used and repaid before reporting dates to mask the level of debt. And finally, the loan rates and/or conditions have been materially misreported. What else do we know? The other set of apprehensions relate to the structure for dividend payment and 'brand fee'. Both the paradigms, as inferred from the report, revolve around an understanding that Vedanta Resources does not have any significant operations of their own and no operating cash flow. Viceroy Research alleges the parent company's debt obligations, both principal and interest, are funded through dividends and brand fees from its Indian unit. The short seller deems the framework for extracting dividends off VEDL to be 'highly inefficient'. This is because Vedanta Resources hold only 56.38% equity stake in VEDL and about 61.6% stake in Hindustan Zinc. The latter is a subsidiary of Vedanta Ltd. Thus, the Delaware short seller explains Vedanta Resources 'forces' its Indian unit to 'declare disproportionally large dividends'. This is to potentially ensure the parent can receive the sought money notwithstanding limited ownership. Viceroy Research adds, the dividends are not funded by free cash flow but by acquiring further debt and draining the balance sheet. The other aspect relates to brand fees, or a licensing fee permitting the payee to use the brand name. Viceroy Research observed coming in as 'rolling, prepaid advances', the fees provided Vedanta Resources with upfront liquidity. 'These transactions lack commercial justification and are designed to bypass dividend leakage to minority shareholders, including the Govt of India,' it argued. The short seller elaborated VRL received $338 million in brand fees from Vedanta Ltd and its subsidiaries in FY 2024. This represented 37% of its net profit during the period. However, according to the short seller, none of the paying companies (that is, Vedanta Ltd and subsidiaries) made 'meaningful use' of the Vedanta brand other than VEDL. How has the company responded? Vedanta Ltd held Viceroy Research's report to be a 'malicious combination of selective information and baseless allegations' to discredit the group. The company argued the short seller's report sought to 'sensationalise the context' for the information that was already public. Additionally, the company deemed the timing of the report to be susceptible and potentially aspiring to 'undermine' their corporate initiatives. The latter, among other things, was also referring to their proposed demerger. Vedanta Ltd intends to retain their base metals business and separate their subsidiaries, namely Vedanta Aluminium Metal Ltd., Talwandi Sabo Power Ltd. (TSPL), Malco Energy Ltd. and Vedanta Iron and Steel Ltd. into standalone entities. The idea was to 'unlock value and attract big ticket investment' for their growth. Viceroy Research however assess the proposed demerger would spread the group's insolvency across multiple, weaker entities; thus, burdening them with a 'legacy of impaired assets and unserviceable debt'. What to make of the entire scenario? Investment analysts and brokerages have refrained from raising an alarm. J.P. Morgan in their report July 10 observed Vedanta Ltd reported EBITDA of $3.1 billion in FY 2025 and a net leverage (that is, the ability to borrow) of 2.2 times. 'We struggle to see financial stress at VDL with these metrics,' it stated. Furthermore, ICICI Direct Research also held the allegations to have far lesser implications on the company's operations and earnings prospects in future. The brokerage research held the company commissioning new capacities across its divisions would help cash flow from operations scaling beyond ₹35,000 crore. 'With this, it aims to trim the group's Net Debt to EBITDA from about 2-times (of EBITDA) in FY 2025 to near 1-time going ahead,' it stated. However, the brokerage warned about any potential change or delay in meeting the parent's debt maturity obligations. 'Any adverse capital allocation decision at the parent company could potentially impact growth capex, balance sheet & dividend payouts at the company level,' the note read. What are the latest developments from Thursday? The short seller countered the company's rebuttal alleging VEDL failed to respond to any of their concerns. Among other things, the short seller sought the rationale for paying dividends when their cumulative cash flows receded to a deficit in the past three years and how it sought to raise debt despite the unsustainable dividend. For perspective, the short seller had alleged VEDL of housing a $5.6 billion free cash flow shortfall against dividend payments of $8 billion over the last three years. It also called upon the board to justify their investments in newer ventures as semiconductors, nuclear and glass, when existing projects remained allegedly 'incomplete and underfunded'. Finally, the short seller also sought to ask if the demerged entities would be subject to cross guarantees with other subsidiaries as Vedanta Ltd and Vedanta Resources – similar to the model alleged in their latest short. Significantly, the short seller published their report days ahead of the company's annual general meeting of shareholders. Deshni Naidoo, CEO at the parent company Vedanta Resources held at the Thursday AGM that short seller report 'compiled only part information filled with gross inaccuracies'. Enumerating Vedanta's growth strategy, she stated, 'We have created a robust business model, and, on the parent-level, our debt has been reduced by $4 billion in the last three years.' Furthermore, she underlined that VEDL would allocate ₹50,000 crore as capital expenditure over the next 3-4 years with each of the projects targeting an 18% internal rate of return.
&w=3840&q=100)
Business Standard
6 days ago
- 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
