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Vedanta shares faced a decline following a report by Viceroy Research. The report alleges financial instability and unsustainable debt within the Vedanta Resources group. Vedanta has refuted these claims, calling them misinformation and baseless allegations. The company defends its financial position and questions the timing of the report. View More

Mumbai:US-based Viceroy Research Group has termed the London-based Vedanta Resource a 'parasite' holding company, whose group structure is financially unsustainable and operationally compromised, and one that poses a severe, under-appreciated risk to creditors. The shares of Mumbai-listed Vedanta slumped as much as 8% intraday. The US-based short seller said that the structure of India-listed Vedanta's holding company resembles a 'Ponzi' scheme, and that the entire group is on the brink of insolvency. "The report is a malicious combination of selective misinformation and baseless allegations to discredit the Group," a spokesperson for Vedanta said in India. "It has been issued without making any attempt to contact us, with the sole objective of creating false propaganda. It only contains 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." Shares of Vedanta slipped nearly 8% intraday on Wednesday, in response to the report, before erasing some losses to close 3.2% lower at ₹441.55 on the BSE. In its report on Wednesday, Viceroy Research said that Vedanta Resources is "systematically draining" Vedanta and forcing the operating company to take on additional debt and deplete its cash reserves, causing value erosion at Vedanta. Viceroy, which calls itself an "investigative financial research firm", has shorted the debt of Vedanta Resources, the unlisted holding company of billionaire Anil Agarwal 's Vedanta. "The Vedanta Group is a house of cards built on a foundation of unsustainable debt, looted assets, and accounting fiction," Viceroy said. "The VRL financial zombie being kept alive by transfusions of cash from its subsidiary VEDL." Live Events 'Suspect Timing' The Vedanta spokesperson also questioned the timing of the report, which comes amid an on-going value-unlocking exercise at the resources conglomerate. "The timing of the report is suspect and could be to undermine the forthcoming corporate initiatives," the Vedanta spokesperson said. "We remain focused on the business and growth, and request everyone to avoid speculation and unsubstantiated allegations." Vedanta is currently in the midst of a demerger where its key businesses are being hived off into independent companies, resulting in a total of 5 companies. "This fails to address the fundamental cash crunch and will saddle the resultant companies with unsustainable debts from their inception," Viceroy noted. To get the cash that it needs, Vedanta Resources forces Vedanta to declare "disproportionately large dividends", which are funded by taking on additional debt, which in turn drains the company's balance sheet, the research firm said. Vedanta Resources, which held a 56.38% stake in Vedanta as on March-end, had a net debt of $11.1 billion at the end of fiscal 2025, down by $1.2 billion. Vedanta, meanwhile, had a net debt of ₹53,521 crore at the end of fiscal 2025, down from ₹57,358 crore a year ago, while its net debt to Ebitda ratio has improved to 1.2 times from 1.5 times a year ago. Hindustan Zinc The group's crown jewel Hindustan Zinc could also be its biggest liability, Viceroy said, given that its resources are being looted through related-party deals with promoter-family owned companies and unjustifiable brand fees. The Government of India, under an 'event of default' in its shareholder agreement, can force Vedanta to buy its 29.5% stake in the company at a 50% premium to the market value, which is a risk of ₹91,075 crore as on March-end. As per the shareholder agreement, Vedanta was obligated to build a 100 MTPA zinc smelter or a formal waiver process within a year of the deal being closed. After a feasibility review, Hindustan Zinc pursued brownfield expansion at Chanderiya instead, given the cost benefits relative to the Kapasan project. This was done with approval from its board of directors, which also had government-nominated directors. "The Ministry of Mines was informed about this development vide letter dated April 04, 2003 (within 1 year) and clarifications sought by GOI on the matter was replied to by the Company. GOI has not raised any concern on this matter after our last response in Dec 2005," a spokesperson for Vedanta said in response to a query sent by ET. Viceroy Research has also said that the company's international zinc assets are depleted and stranded, while terming the Talwandi Sabo Power plant "virtually worthless". The firm also said that the Konkola Copper Mines in Zambia are operationally unviable, while Electrosteel Steel faces the threat of losing its permit to operate given environmental violations. (You can now subscribe to our Economic Times WhatsApp channel) (You can now subscribe to our Economic Times WhatsApp channel)