Vedanta Subsidiary Hindustan Zinc Shares Falls Over 3% After Viceroy Report

Hindustan Zinc Ltd. has also plunged after Viceroy Research turned short on Vedanta's parent firm's debt. Vedanta owns 63.4% of Hindustan Zinc as of March. Notably, 93% of the promoter's equity is pledged; that is, the shares are with lenders as collateral.

The US-based research firm has turned short on Vedanta Resources, as it found the group's financial structure unsustainable and operationally compromised.

According to Viceroy Research, Vedanta Resource's position poses severe risk to creditors. Vedanta Resource has no significant operation of its own and is sustained by extracting cash from its 'dying host,' Vedanta Ltd. Calling Hindustan Zinc, the company's crown jewel and biggest liability, the short-sellers note that the firm is a legal and financial minefield.

Apart from the many claims made, the firm has doubled down on Hindustan Zinc and the systematic looting happening in Hindustan Zinc.

"Resources are being looted through related-party deals with promoter-family-owned companies and unjustifiable brand fees," said the report.

It also claims that there are massive hidden liabilities, as the company has disputed over $1.68 billion of statutory dues, which it keeps off-balance sheet and are not recognised as contingent tax liabilities.

"Criminal Investigation: The original 2002 disinvestment of Hindustan Zinc to Vedanta is under active criminal investigation by India's CBI for corruption and fraud," added the report.

Hindustan Zinc stock fell as much as 4.79% during the day to Rs 415 apiece on the NSE. It was trading 2.41% lower at Rs 425 apiece, compared to the benchmark Nifty 50 trading 0.01% higher at 12:46 p.m.

It has declined 37.42% in the last 12 months and 5.01% on a year-to-date basis. The relative strength index was at 45.

Out of 16 analysts tracking the company, six maintain a 'buy' rating, three recommend a 'hold,' and seven suggest 'sell,' according to Bloomberg data. The average 12-month consensus price target implies an upside of 8.7%.