Has Viceroy Exposed Vedanta Group's Alleged Fund Recycling?

Mumbai, July 17 (NationPress) - The US-based short-seller Viceroy Research has made new accusations against the Anil Agarwal-led Vedanta Group, alleging that the company's promoters are concealing an undisclosed stake through a welfare trust to facilitate the recycling of funds.

The firm under scrutiny is PTC Cables Pvt. Ltd (PTCC), which possesses a 1.91% share in Vedanta Ltd, a company boasting a market capitalization of ₹1.75 lakh crore.

PTCC is managed by the Bhadram Janhit Shalika Trust (BJST), which Viceroy claims is under the control of the Agarwal family, the founders of the Vedanta Group. In contrast, the Vedanta Group has labeled these allegations as “unfounded.”

Viceroy asserts that PTCC has garnered ₹1,500 crore in dividend income from Vedanta over the last five years, arguing that this capital was subsequently “upcycled” to entities associated with the promoters.

“PTCC serves solely to covertly recycle Vedanta’s cash into promoter-related vehicles while maintaining an illusion of independence,” the Viceroy report stated.

“These claims are without merit. Neither BJST nor PTCC falls under the promoter group as per regulatory definitions, and their shareholding is transparently disclosed in public records,” a Vedanta spokesperson commented.

The spokesperson emphasized that the company adheres strictly to the disclosure regulations set forth by the Securities and Exchange Board of India (Sebi) and the Companies Act, 2013.

Viceroy claims its allegations are grounded in publicly accessible records. In a 2009 income tax case, BJST was linked to Anil Agarwal’s residence in Mumbai.

Additionally, the trust’s address was associated with Todarwal & Todarwal, a firm linked to Arun Todarwal, who is a director at Sterlite Power Grid Ventures, a subsidiary of Vedanta. Todarwal has previously served on the boards of other Vedanta entities including Hindustan Zinc Ltd and Sterlite Technologies.

The report acknowledges the absence of conclusive documentation regarding current control but notes that Indian trusts have less stringent disclosure requirements compared to corporations.

Viceroy also cited former employees of Vedanta who suggested that the Agarwal family's oversight of PTCC was an “open secret” within the organization, although these individuals were unnamed.

The report highlights governance issues at PTCC, established in 1993 with the Agarwal family as shareholders, and transferred to BJST in 2017. Current directors include Todarwal and Kannan Ramamirthan.

Ramamirthan serves as an independent director for Vedanta's subsidiary Hindustan Zinc and has held positions in various other Vedanta companies.

Vedanta has not indicated in its disclosures that PTCC, categorized as a public shareholder, has directors with long-standing ties to the group, as per the report.

In 2020, the proxy advisory firm Stakeholder Empowerment Services (SES) previously identified BJST as the SIL Employee Welfare Trust, previously connected to Sterlite Industries Ltd, which later merged into Vedanta. The trust was later renamed as BJST.

“The current control over BJST is unclear,” SES noted. However, it indicated that if Vedanta controlled the trust, PTCC should be recognized as a promoter shareholder.

Viceroy released its initial report on the Vedanta Group on July 10, just a day prior to Vedanta Ltd's annual general meeting, which led to a temporary drop in the company's stock, although shares later rebounded.

Following the Viceroy report, Vedanta responded, claiming the report was drafted without any effort to contact the company, aimed solely at generating false propaganda.

Simultaneously, Viceroy Research has expressed anticipation for a response from the Securities and Exchange Board of India (Sebi) regarding its inquiries about the Vedanta Group.

Viceroy has declared a short position in the bonds of Vedanta Resources, an unlisted holding company of the group, but clarified that it has no investments in any other listed Vedanta entities in India.