Are Vedanta Shares In Trouble After Allegations from a US Short-Seller?

Mumbai, July 9 (NationPress) - Shares of Vedanta experienced a decline of more than 7 percent during intra-day trading on Wednesday. This drop followed a report from the US short-seller Viceroy Research, which claimed that the conglomerate bears resemblance to a “Ponzi” scheme. The company, owned by Anil Agarwal, has strongly refuted these allegations.

The report stated, “The entire group structure is financially unsustainable, operationally compromised, and poses a severe, under-appreciated risk to creditors.” According to the short-seller, Vedanta Resources Ltd. functions primarily as a holding company that relies on funds from Vedanta Ltd. to settle its debts, lacking substantial operations of its own.

This situation has diminished the value of the group's primary collateral, compelling Vedanta to incur additional debt and exhaust its reserves, as per the report.

Data from the BSE indicates that promoter holding in Vedanta stood at 56.38 percent as of March.

Furthermore, the report highlighted that “Vedanta Resources’ actions to meet its short-term obligations directly impair its creditors’ long-term ability to recover their principal.” It added that the scenario was reminiscent of a “Ponzi” scheme.

Viceroy suggested that the conglomerate had postponed substantial undisclosed liabilities to maintain solvency, relying on new debts and accounting adjustments. It warned that the risk of a group-wide insolvency event was becoming increasingly likely.

This report was released just ahead of Vedanta's annual general meeting (AGM) scheduled for Thursday.

In response, the Vedanta Group dismissed the short-seller's claims as a “malicious combination of selective misinformation and baseless allegations” designed to tarnish the group's reputation. The company alleged that the report was published without seeking any comments from them, asserting it was intended to create a false market perception.

They argued that the report contained a mere collection of publicly accessible information, misrepresented to benefit from the ensuing market reaction.

According to a spokesperson for the Vedanta Group, “The timing of the report is suspect and could be to undermine forthcoming corporate initiatives.” They expressed confidence that stakeholders would see through such tactics.

On the trading front, the stock opened positively at Rs 461.0 compared to the previous closing of Rs 456.30 on the NSE. However, it plummeted over 7 percent, reaching an intraday low of Rs 420.65 amid escalating selling pressure triggered by the Viceroy allegations.

As of around 13:55, shares were trading at Rs 439.95, down 3.58 percent, regaining some losses.

During early trading, shares of Hindustan Zinc, a subsidiary of Vedanta Group, also dropped over 3 percent. The stock started at Rs 437.30, slightly higher than the last closing price of Rs 436.20 on NSE, but fell to an intraday low of Rs 415.15 following the Viceroy Research claims.

By about 2:13 pm, shares were trading at Rs 425.15, down 2.53 percent or Rs 11.05.