New Delhi: After the Adani-Hindenberg saga, another short seller has accused Anil Agarwal-led Vedanta Resources of running a ‘ponzi scheme’ with its Mumbai-listed subsidiary Vedanta Ltd. New York-headquartered Viceroy Research has released a daming report early this week on Vedanta Resources, where it calls Vedenta Resources Ltd (VRL) a ‘parasite’ that has no significant operations of its own, but gets Vedanta Ltd (VEDL) to borrow heavily to pay it dividends.
The report alleges that Vedanta Ltd had a Rs.46,000 crore cash shortfall even as it paid Rs.66,400 crore in dividends during that time, money it never earned.
Along with this claim, the short seller also claims that other subsidiaries of Vedanta Group are being used to launder money to VRL, except one, BALCO. One of the most damning allegations is that Vedanta Resources took a Rs.7,900 crore loan from Vedanta Ltd to delist the company. Essentially, this means VEDL’s own money was being re-routed to buy back its own shareholders. And even that loan is still half unpaid.
These allegations can be a serious blow to Anil Agarwal’s Vedanta Group, which has claimed to be a rags-to-riches story, with the group being worth almost $2.9 billion to date. Vedanta Limited has been a stock market darling for conservative investors, considering the large interim dividends the company pays almost 3-4 times a year.
One thing to remember here is that Viceroy Research is a short seller just like the now-defunct Hindenberg Research. These entities make money while betting on a company’s stock prices going down, and may sell it at a higher price at a later date. These entities are known to have a deep understanding of the stock market and have the patience to wait for years to expect returns.
When Hindenburg made its allegations against Adani in January 2023, the aftermath of the report caused Adani’s share prices to fall dramatically, wiping out almost $82.9 billion in the process. Even though Vedanta isn’t as big of a company as Adani, this allegation could seriously affect its reputation, even though the company isn’t as big as Adani.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investing in stocks includes financial risks, and past performance is not indicative of future results. Readers should conduct their own research or consult with a qualified financial advisor before making any investment decisions.
