PTI
New Delhi
US short-seller Viceroy Research on Wednesday called billionaire Anil Agarwal-led British firm Vedanta Resources a “parasite” that is “systematically draining” its Indian unit, an allegation which the Group called as “selective misinformation and baseless” aimed at discrediting it.
The US firm took a short position against the debt of Vedanta Resources, the UK-based parent of Indian miner Vedanta Ltd, alleging that the Group “is a house of cards built on a foundation of unsustainable debt, looted assets and accounting
fiction”.
Vedanta responded saying the report was “a malicious combination of selective misinformation and baseless allegations” and that its authors issued it without contacting the Group.
“Vedanta Resources Ltd (VRL) is a ‘parasite’ holding company with no significant operations of its own, propped up entirely by cash extracted from its dying ‘host’: Vedanta Ltd (VEDL),” Viceroy said in an 85-page report.
VEDL has paid dividends worth Rs 75,800 crore in the last four fiscal years, while its unit Hindustan Zinc paid another Rs 57,300 crore over the same period. 56.38% of the dividend payout at VEDL went to Vedanta Resources in line with its shareholding, and 61.62% in Hindustan Zinc.
Viceroy said VEDL has accrued $5.6 billion free cash flow shortfall against dividends over the last 3 years while its net debt has increased by $6.7 billion (around 200%) since FY22. “VEDL has depleted its cash reserves and exhausted its ability to borrow money and ‘liquidate’ working capital items,” it said.
Conversely, over the same period, VRL’s interest costs have increased by $200 million per year. It reported FY25 total interest costs of $835 million against $4.9 billion of gross debt implies an effective interest rate of 15.8%, the report said adding this was inexplicable as the London-based company’s publicly issued bonds and disclosed term loans carry rates closer to 9-11%.
“We see only three possible explanations, all of which suggest a level of financial misconduct: Undisclosed, off-balance sheet debt is being serviced, with the costs disguised as interest expenses. This would be fraud. (Secondly) high-cost intra-period loans are being used and repaid before reporting dates to mask the true level of debt. (And thirdly) loan rates or conditions are materially misreported to the market,” it said.
