After Adani, now Vedanta pulled up for malpractice; will truth emerge?

US short seller Viceroy Research released a report charging billionaire Anil Agarwal's mining conglomerate to be financially unsustainable and posing a severe risk to creditors.  

Naturally, the mining giant refuted the charges calling it selective misinformation and baseless, aimed at discrediting the group. But not before Vedanta stocks fell as much as 6 per cent following the report. It recovered some losses though in the next few days.

Calling Vedanta Resources Ltd (VRL) a heavily indebted parent company, Viceroy in its report alleged the entire group structure is financially unsustainable, operationally compromised, and poses a severe, under-appreci ated risk to creditors.

Interestingly, the report came on a day before Agarwal, chairman of Vedanta Ltd, is to address the company's shareholders at the annual general meeting. Vedanta in its rebuttal, took a swipe at Vice roy for the timing of the report. Responding to the rebuttal, the Viceroy Group wrote on X that Vedanta has dismissed its thoroughly referenced report without any attempt to disapprove their work.

"This is likely because they cannot refute our find ings. We stand behind our work and are happy to take questions," Viceroy said.

A cursory reading of the report shows  Vedanta's interest expenses vastly exceeds its reported note rates, evidence of inflated asset values, expenses across operating subsidiaries being systematically capitalised to artificially inflate profits and asset values, and billions of dollars of disputed expenses kept off-balance sheet and undisclosed in financial reports.

It may be added that the strategy deployed by Viceroy is the same as that used by another US short seller Hindenburg Research in January 2023 against the Adani group.

Hindenburg had alleged brazen stock manipulation and accounting fraud by the Adani Group. While Adani group refuted the allegations, calling them baseless and malicious, the Hindenburg report led to group stocks losing as much as USD 150 billion in value at their lowest point.

Much more than the losses sustained so far by the Vedanta group. Interestingly, billionaire Anil Agarwal's mining con glomerate Vedanta Ltd nearly quadrupled its donations to the ruling Bharatiya Janata Party (BJP), con tributing Rs 97 crore in the fiscal year ending March 2025, according to its latest annual report.

In the Adani investigation, financial experts have opined that only some pieces of a giant puzzle are out. They added that it’s unlikely that a $40-million short trade by Kingdon was all it took to unleash a $150 billion rout in Adani companies' market caps.

With heavy political clout of the Adani and the Vedanta group, it is most unlikely that any fair and independent probe would ever emerge, as most of the institutions including market regulator SEBI are under the political influence of New Delhi and the political masters.

So far, the opposition parties in India have not acted upon the Viceroy report and started mounting pressure on SEBI or the government in the allegations against Vedanta.