US-based short seller calls Vedanta Group ‘Ponzi-like’ structure

New Delhi: The US-based short seller Viceroy Research on Wednesday published a scathing report alleging material discrepancies in billionaire Anil Agarwal-led Vedanta Group comparing its holding company Vedanta Resources to a "Ponzi scheme" like structure.

The report noted that London-headquartered Vedanta Resources has no major operations of its own and is dependent on extracting cash from Vedanta Ltd to meet its obligations.

The core of our investment thesis rests on a simple but critical dynamic: VRL (Vedanta Resources Limited) is a "parasite" holding company with no significant operations of its own, propped up entirely by cash extracted from its dying “host": VEDL (Vedanta Limited), Viceroy Research said in its report.

Viceroy Research describes itself as an investigative financial research group registered in Delaware, USA.

The report led to a sharp drop in share price of Vedanta Group companies. Vedanta Ltd slumped by 3.38% to Rs 440.80 at the BSE. The company’s share was trading in the positive until noon. It dipped by around 8% hitting a low of Rs 421 shortly after the Viceroy Research report was released. Hindustan Zinc slumped 2.56% to Rs 425.05.

Vedanta Group has dismissed the report calling it “a malicious combination of selective misinformation and baseless allegations to discredit the Group.”

“It has been issued without making any attempt to contact us with the sole objective of creating false propaganda. It only contains compilation of various information - which is already in the public domain, but the authors have tried to sensationalise the context to profiteer from market reaction,” Vedanta Limited said in a regulatory filing to the BSE.

Vedanta Group also questioned the timing of the report saying the intent of the report could be to undermine the forthcoming corporate initiatives.

“Our stakeholders are discerning enough to understand such tactics. In fact, to avoid any responsibility – authors of the report have added various disclaimers that the report has been prepared for educational purposes only and expresses their opinions and are not statements of fact. We remain focused on the business and growth, and request everyone to avoid speculation and unsubstantiated allegations,” Vedanta Limited said.

Vedanta Resources Limited is the holding company for Vedanta Limited and Konkola Copper Mines, a Zambia-based copper mining and smelting company.

Hindustan Zinc, an erstwhile public sector undertaking, is a subsidiary of Vedanta Limited.

Vedanta group has announced plans to restructure its business into five different entities – Vedanta Limited, Vedanta Aluminium, Vedanta Oil & Gas, Vedanta Steel & Ferrous Materials and Vedanta Power.

The parent company of Vedanta Resources Limited and Vedanta Limited is called Volcan Investments Limited, which is controlled by Anil Agarwal through a family trust named Anil Agarwal Discretionary Trust.