Scathing report alleges debt spiral, accounting irregularities, and cash extraction from subsidiaries; Vedanta dismisses claims as “malicious and misleading”
In a hard-hitting report that has sent shockwaves through financial circles, US-based forensic research firm Viceroy Research has accused Vedanta Resources Ltd (VRL) and its listed subsidiary Vedanta Ltd (VEDL) of operating an unsustainable financial structure that resembles a “Ponzi-like scheme.” The report claims the group survives by systematically siphoning off cash from its profitable operating companies to service mounting holding-level debt.
“We are short the debt stack of Vedanta Resources. The entire group structure is financially unsustainable, operationally compromised, and poses a severe risk to creditors,” Viceroy alleged in its report released on July 9.
Describing Vedanta’s business model as one of “parasite and host,” Viceroy claimed that parent company VRL—controlled by the Agarwal family—extracts excessive dividends from subsidiaries like Hindustan Zinc Ltd (HZL), BALCO, and Cairn Oil & Gas, often funded through borrowings rather than genuine free cash flow. The report warned that this upstreaming erodes the financial health of VEDL, undermining the very collateral base that VRL depends on to raise new debt.
Viceroy also accused Vedanta of accounting manipulation, including the capitalization of operating expenses to artificially inflate profits and asset values, and flagged concerns over potential undisclosed debt. The report further highlighted questionable “brand fees” charged by VRL to its subsidiaries, describing them as unjustified and excessive.
The report singled out Hindustan Zinc Ltd as a legal minefield, warning that existing shareholder agreements could allow the Government of India to reclaim its stake at a steep discount. It also pointed to a CBI investigation into the original disinvestment of HZL and questioned the legitimacy of brand fees imposed without government board approval.
Viceroy criticized Vedanta’s proposed demerger, calling it a strategy that would “spread insolvency” rather than solve deep-rooted financial and governance issues. It also raised concerns over auditor quality, offshore governance practices, and rapid management turnover.
In response, Vedanta vehemently denied all allegations, calling the report a “malicious combination of selective misinformation” aimed at manipulating markets. The company insisted that the claims were unfounded, lacked proper verification, and were designed to disrupt its upcoming corporate initiatives.
Vedanta stated it remains committed to business growth and urged stakeholders to disregard “speculative and unsubstantiated allegations.”
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