American short-seller Viceroy Research has once again grabbed global headlines, this time targeting India’s Vedanta Group with a series of serious allegations. Just a day before Vedanta Ltd’s annual general meeting, Viceroy released an 87-page report accusing the conglomerate of financial misconduct, corporate governance failures, and misleading investors. While Vedanta has firmly denied these claims, the shockwaves have already rattled markets and investors alike.
A History of Activism: Viceroy’s Reputation and Track Record
Founded in 2016 by British short-seller Fraser Perring, Viceroy Research is known for exposing corporate fraud and financial irregularities worldwide. The firm famously uncovered irregularities at Wirecard, leading to one of Germany’s biggest corporate scandals. With a self-reported success rate of about 80% on its calls, Viceroy has developed a reputation for deep forensic analysis and relentless follow-up.
This report marks Viceroy’s first foray into targeting an Indian company. Notably, Viceroy typically releases multiple reports on the same firm, indicating this is likely just the beginning for Vedanta.
The Core Allegations: Debt, Dividends, and Dubious Accounting
At the heart of Viceroy’s allegations is the assertion that Vedanta operates an unsustainable corporate structure. Vedanta Resources Ltd (VRL), the holding company, carries significant debt but lacks operational revenue. According to Viceroy, this leads to a precarious dependency on dividends from operating subsidiaries like Vedanta Ltd and Hindustan Zinc Ltd to service VRL’s debt.
Viceroy claims that Vedanta Ltd has paid out disproportionately large dividends despite a cumulative free cash flow deficit of $5.6 billion over the past three years. This aggressive payout strategy, they argue, undermines long-term sustainability and burdens minority shareholders.
Another major point of contention is the alleged “hidden debt.” Viceroy points to VRL’s high reported interest costs—$835 million against $4.9 billion of gross debt, suggesting an effective interest rate of 15.8%, much higher than the disclosed rates of 9-11%. They argue this indicates off-balance sheet borrowings or short-term loans temporarily settled before reporting periods to avoid disclosure.
Overstated Asset Values and Questionable Fees
Viceroy also accuses Vedanta of inflating the value of key assets, including the Konkola Copper Mines, Talwandi Sabo power plant, and various zinc and gold operations. For example, Konkola Copper Mines, which has been in liquidation since 2019, was reportedly brought back on Vedanta’s books at a valuation of $1.6 billion—an amount Viceroy calls fictitious.
Additionally, the short-seller criticized Vedanta for paying excessive brand fees to VRL. Over four years, these fees have totaled $1.16 billion, despite VRL having minimal operational presence and no staff in London. Viceroy questions the commercial justification for these payments, suggesting they effectively act as interest-free rolling credit.
Vedanta’s Response: Strong Denials and Defiant Stance
Vedanta Group has categorically denied all allegations, calling the report a “malicious combination of selective misinformation and baseless allegations.” According to the company, using a holding company structure and brand fee arrangements are common practices among global conglomerates. Vedanta insists its assets are periodically audited by reputed firms and that its cost of debt has actually decreased by 300 basis points in FY25.
Furthermore, Vedanta cast doubt on the timing of the report, suggesting it was strategically released to disrupt its ongoing demerger plans and upcoming AGM. The group argued that Viceroy’s report merely sensationalizes already public information, ignoring operational realities and context.
Market Reaction and Investor Concerns
The immediate market reaction saw Vedanta Ltd’s shares fall sharply, declining nearly 8% intraday before closing 3.38% lower. Hindustan Zinc Ltd shares also dipped by 2.56%. Fraser Perring, Viceroy’s co-founder, suggested the muted initial reaction was expected, stating that investors would need time to digest the complexity and scale of the allegations.
Analysts have expressed mixed views—some arguing that the report reveals nothing fundamentally new but instead compiles existing risks in a dramatic fashion. Others, however, suggest that the scale and detail of the allegations could push regulators and institutional investors to take a closer look.
Looking Ahead: More to Come
Fraser Perring has warned that “there is more to come,” hinting at additional reports that may uncover further financial inconsistencies. The firm has already shared a list of 37 probing questions with sell-side analysts, urging them to press Vedanta’s management for detailed explanations.
The coming weeks will be critical for Vedanta. Investors and regulators will be watching closely to see if the allegations gain traction, whether further evidence surfaces, and how management addresses these grave concerns during its strategic demerger and beyond.
Conclusion
The Viceroy report has added a new chapter to the ongoing global narrative around corporate governance, transparency, and activist short-selling. For Vedanta and its shareholders, this marks a crucial inflection point—one that will test the company’s resilience, investor faith, and commitment to transparency. As the story unfolds, one thing is clear: the battle for narrative control between Vedanta and Viceroy is far from over.
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Disclaimer
This article should not be interpreted as investment advice. For any investment decisions, consult a reputable financial advisor. The author and publisher are not responsible for any losses incurred by investors or traders based on the information provided.