Vedanta shares slide as short seller flags ‘collapse risk’ at parent firm
US-based Viceroy Research calls Vedanta Resources a ‘financial zombie’; firm denies claims
Dubai: Shares of Vedanta Ltd dropped as much 8% on July 9, following the release of a critical report by US-based short-seller Viceroy Research, which alleged severe financial and governance issues at the company’s parent, Vedanta Resources Ltd (VRL).
The report triggered sharp investor reaction, dragging Vedanta’s stock to a low of Rs421 on the BSE, before partially recovering to Rs 439. The broader Sensex, in contrast, stayed relatively flat, trading at 83,761 around midday.
Viceroy: Vedanta’s parent 'on brink of collapse'
Viceroy Research — known for its forensic-style financial investigations — said it had shorted the debt stack of Vedanta Resources, describing the group as “financially unsustainable” and “operationally compromised.”
In a bluntly worded report, Viceroy likened Vedanta Resources to a "financial zombie" kept alive only by cash infusions from its Indian subsidiary, Vedanta Ltd. It warned that the group’s planned demerger would not improve stability, but rather “spread the insolvency across multiple, weaker entities.”
Key allegations raised in the report:
Misuse of capital projects: Vedanta allegedly raises funds for capital-heavy projects but diverts them to repay parent debt.
Interest expense mismatch: Actual interest costs may exceed reported numbers, raising transparency concerns.
Overvalued assets: Some group companies are claimed to be overvalued and burdened by cross-guaranteed debt.
Capex manipulation: Alleged capitalization of expenses to inflate reported profits.
Undisclosed liabilities: Billions in disputed financial obligations reportedly excluded from financial statements.
Governance lapses: Viceroy cites poor oversight and questionable auditor appointments.
Potential fraud indicators: The report suggests some financial inconsistencies may constitute fraudulent behavior.
Vedanta rejects claims, calls report ‘malicious’
Vedanta Group responded swiftly, calling the allegations “baseless” and “a malicious combination of selective misinformation.” The company claimed the report was released without any attempt to contact management and was timed to damage sentiment ahead of important corporate decisions.
“The report sensationalises publicly available data and includes disclaimers to avoid accountability,” Vedanta stated, urging investors to “focus on fundamentals and long-term growth.”
Demerger plans underway, high debt concerns
The short seller’s accusations come at a critical time for Vedanta, which is preparing to split into multiple listed entities through a planned demerger. While the move is aimed at unlocking value and simplifying operations, analysts have long flagged the group’s complex structure and heavy debt burden as red flags.
“This isn’t the first time governance and leverage concerns have loomed over the Vedanta group,” said a Mumbai-based investment analyst. “But Viceroy’s aggressive stance could put fresh pressure on the demerger timeline.”
Despite a partial recovery in trading, Vedanta shares remain under investor watch, with volatility expected to continue until greater clarity emerges on the group’s financial structure and regulatory response to the report.
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