Mumbai, July 9, 2025 – Shares of Vedanta Limited and its subsidiary Hindustan Zinc Limited crashed by up to 8% and 5%, respectively, on Wednesday following a scathing report by U.S.-based short-seller Viceroy Research. The 87-page report, titled “Limited Resources,” accused the Vedanta Group’s parent company, Vedanta Resources Ltd (VRL), of operating a “Ponzi-like” structure, alleging financial irregularities and unsustainable debt practices that pose significant risks to creditors and shareholders. The report triggered a sharp sell-off, impacting investor sentiment and dragging down the broader Nifty Metal index.
Viceroy Research’s Allegations
Viceroy Research, known for its forensic financial investigations, claimed that Vedanta Resources, the London-based parent company, is a “parasite” with no significant operations of its own, relying entirely on cash extracted from its Indian subsidiary, Vedanta Limited. The report alleges that VRL siphons funds through excessive dividend payments, brand fees, and related-party transactions, forcing Vedanta Limited to take on increasing leverage and deplete its cash reserves. Viceroy highlighted a $5.6 billion free cash flow shortfall at Vedanta Limited over the past three years, funded by new borrowings, aggressive working capital management, and reserve depletion, likening this strategy to a “Ponzi scheme.”
The report further accused the Vedanta Group of capitalizing operating expenses to artificially inflate profits and asset values, pointing to discrepancies in interest expenses that exceed reported borrowing rates. It also flagged operational concerns, including the non-functional Skorpion Mine in Namibia and the loss-making Black Mountain Mining in South Africa. For Hindustan Zinc, Viceroy described it as a “legal and financial minefield,” citing a potential $10.66 billion liability due to government options and an ongoing criminal investigation by India’s Central Bureau of Investigation (CBI) into the 2002 disinvestment of Hindustan Zinc to Vedanta for alleged corruption.
Viceroy’s report emphasized that the group’s $15.7 billion in interest-bearing liabilities, with an effective interest rate of around 13%, renders its structure “financially unsustainable and operationally compromised.” The short-seller disclosed that it has taken a short position on VRL’s debt stack, warning that even a single risk could destabilize the group’s fragile structure.
Market Impact
The allegations sparked a sharp decline in share prices. Vedanta Limited’s stock fell as much as 7.7% intraday to ₹421 on the BSE, closing 3.3%–4.5% lower at around ₹434–₹441.3 on the NSE. Hindustan Zinc, in which Vedanta owns a 63.4% stake (with 93% of promoter equity pledged as collateral), dropped 4.8% to ₹415.30, ending the day 2.5%–3% lower at approximately ₹424–₹425.20. The sell-off extended to other metal stocks, with Hindustan Copper, SAIL, and Tata Steel declining up to 4%, contributing to a 1.38% drop in the Nifty Metal index.
The market reaction was amplified by high trading volumes, with 60.62% of Vedanta’s trades marked as deliverable, indicating genuine investor concern rather than speculative activity. Posts on X reflected the sentiment, with users highlighting the report’s allegations of financial instability and governance lapses, though some cautioned against overreacting to short-seller claims.
Vedanta’s Response
Vedanta Group issued a strong rebuttal, calling the Viceroy report a “malicious combination of selective misinformation and baseless allegations” aimed at discrediting the company and creating false propaganda. In a statement to CNBC-TV18, a Vedanta spokesperson emphasized the group’s focus on business growth and dismissed the report as misleading, noting that Viceroy did not contact the company before publishing its claims. The company urged investors to avoid speculation and reaffirmed its commitment to operational excellence, citing a 9% year-on-year increase in quarterly alumina production at its Lanjigarh refinery, reaching 587 kilotonnes.
Context of the Demerger Plan
The report’s release comes at a critical time, as Vedanta is pursuing a demerger plan to split into five separate listed entities covering aluminum, oil and gas, zinc, power, and other sectors. The demerger, which has received a no-objection certificate from the NSE but awaits approval from the National Company Law Tribunal (NCLT), aims to unlock value and improve promoter liquidity. However, Viceroy criticized the plan, arguing it would not address the group’s underlying cash flow issues and could burden new entities with debt from inception. The Petroleum Ministry’s request for additional time to review the proposal during a recent NCLT hearing has added uncertainty to the process.
Additionally, Vedanta’s recent financial moves, such as a ₹7 per share interim dividend announced in June 2025 (offering a 7% yield) and the sale of a 1.6% stake in Hindustan Zinc for ₹3,028 crore, were framed as efforts to reduce debt and improve liquidity. However, Viceroy alleged these actions reflect a pattern of “looting” to service VRL’s $4.9 billion standalone net debt as of March 31, 2025.
Broader Implications
The Viceroy report has reignited concerns about corporate governance and debt management within the Vedanta Group, particularly regarding promoter pledges and related-party transactions. The claim that 93% of Vedanta’s equity in Hindustan Zinc is pledged to lenders underscores the group’s reliance on its subsidiary’s cash flows. The report also highlighted undisclosed liabilities, including $1.68 billion in disputed statutory dues at Hindustan Zinc, which are not recognized as contingent tax liabilities.
Analysts note that Vedanta’s stock has faced pressure over the past year, with a 6.67% decline in 2025 and Hindustan Zinc down 37% over the same period. The timing of the report, just before Vedanta’s annual general meeting on July 10, 2025, has intensified scrutiny on Chairman Anil Agarwal’s leadership and the group’s financial strategy.
Critical Perspective
While Viceroy’s allegations are serious, short-seller reports often aim to provoke market reactions for profit, and their claims should be scrutinized. Vedanta’s operations span critical sectors like zinc, copper, aluminum, and oil, with significant contributions to India’s resource economy. The company’s rebuttal highlights its operational achievements, but the high debt levels and complex group structure raise legitimate questions about long-term sustainability. Investors should weigh both the report’s accusations and Vedanta’s response, alongside independent financial analysis, to assess the true extent of risk.
As the situation unfolds, Vedanta’s ability to address these concerns, execute its demerger plan, and maintain creditor confidence will be critical. The stock market’s reaction reflects heightened uncertainty, but the company’s operational strengths and strategic restructuring efforts may yet counterbalance the negative sentiment sparked by Viceroy’s report.