On July 9, 2025, Vedanta Ltd’s share price experienced a significant decline, falling nearly 8% to ₹420.65 during intraday trading. This sharp drop followed a report by Viceroy Research, a U.S.-based short-seller, which accused Vedanta Resources, the parent company of Vedanta Ltd, of severe financial mismanagement. The report claims that the group’s financial structure is unsustainable and poses significant risks to creditors.
Viceroy Research’s Allegations
Viceroy Research has taken a short position against the debt of Vedanta Resources, alleging that the company is “systematically draining” funds from its operational arm, Vedanta Ltd, to meet its obligations. The report describes Vedanta Resources as a “holding company with no major operations of its own,” relying heavily on cash extracted from Vedanta Ltd to stay afloat. This practice has led to increasing leverage and depletion of reserves, weakening the value of the group’s primary collateral.
As of March 31, 2025, Vedanta Resources reported a standalone net debt of $4.9 billion. Viceroy’s report suggests that the company’s actions to meet short-term obligations directly impair creditors’ long-term ability to recover their principal, likening the situation to a Ponzi scheme.
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Impact on Vedanta Share Price
The allegations have had a profound impact on Vedanta Ltd’s share price. Following the release of Viceroy’s report, the stock price plummeted nearly 8% to ₹420.65, marking its lowest level in two months. At the time of writing, the share price was trading at ₹428.2, reflecting a 6.16% decline. The broader market remained relatively stable, with the Nifty 50 index trading flat during the same period.
The decline also affected other companies within the Vedanta Group. Shares of Hindustan Zinc, a subsidiary of Vedanta, fell by 2.6% to ₹425. The Nifty Metal index, which includes stocks like Vedanta and Hindustan Copper, was down 1.7%, with Vedanta and Hindustan Copper leading the losses.
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Understanding the Allegations
Viceroy Research’s report outlines several concerns regarding Vedanta Resources’ financial practices:
- Capital Misallocation: Funds raised for new projects are allegedly redirected to service Vedanta Resources’ debt.
- Excessive Interest Expenses: Interest expenses reported by Vedanta are claimed to exceed its stated rates, raising questions about the company’s financial transparency.
- Undisclosed Liabilities: The group is accused of deferring large, undisclosed liabilities and relying on new debt and accounting adjustments to remain solvent.
These practices, according to Viceroy, have led to a financially unsustainable and operationally compromised group structure, posing severe risks to creditors.
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Broader Implications for Investors
The allegations against Vedanta Resources have significant implications for investors. The company’s heavy reliance on debt and the questionable financial practices raise concerns about its long-term viability. Investors may face challenges in recovering their investments if the company’s financial situation deteriorates further.
Additionally, the situation has led to increased scrutiny from regulators and the investment community. The company’s attempts to address its debt issues, including previous debt restructuring plans, have been met with mixed reactions. While some credit rating agencies have upgraded Vedanta Resources’ credit rating following these plans, the latest allegations suggest that significant concerns remain.
Conclusion
The allegations by Viceroy Research have cast a shadow over Vedanta Resources’ financial stability, leading to a significant decline in Vedanta Ltd’s share price. Investors should closely monitor the situation and consider the potential risks associated with the company’s financial practices. As the story develops, further information may emerge that could impact investor sentiment and the company’s future prospects.
