Vedanta Resources A 'Parasite' Says Viceroy Research — Read Full Report By Short Seller
The short seller says that the Vedanta group structure is financially unsustainable, operationally compromised, and poses a severe, under-appreciated risk to creditors.
Vedanta Resources Ltd., shares plunge over 7% on Wednesday after US-based short seller Viceroy highlighted that the entire group structure is financially unsustainable, operationally compromised, and poses a severe, underappreciated risk to creditors.
The short seller has called Vedanta Resources a 'parasite' holding company with no significant operations of its own, propped up entirely by cash extracted from its dying 'host' Vedanta Ltd.
"Viceroy is short of Vedanta Resources, the heavily indebted parent & majority owner of Vedanta Limited. The group structure is financially unsustainable, operationally compromised, & resembles a Ponzi scheme," the short seller posted on its X profile.
According to Viceroy, VRL is systematically draining VEDL to service its own debt burden, forcing the operating company to take on ever-increasing leverage and deplete its cash reserves. This looting erodes the fundamental value of VEDL, which constitutes the primary collateral for VRL’s own creditors.
Consequently, VRL’s actions to meet its short-term obligations directly impair its creditors’ long-term ability to recover their principal, a situation that resembles a Ponzi scheme where VEDL stakeholders, which include VRL creditors, are the “suckers”, the report noted.
The short seller further noted that this arrangement has pushed the entire group to the brink of insolvency, propped up only by a continuous cycle of new debt, accounting tricks, and the deferral of massive, undisclosed liabilities. "New credit lines serve only to destroy the PropCo’s only collateral, staving immediate insolvency at the expense of any chance of creditors recovering principal. The mechanisms used to maintain the illusion of stability are failing, and a group-wide insolvency event is no longer a distant risk," it added.
Viceroy Research's investigation has uncovered material quantitative and qualitative discrepancies in Vedanta group’s, many of which Viceroy believe are tantamount to fraud.
