Vedanta Resources on US short seller Viceroy’s radar
Viceroy Research terms it as financially unsustainable and posing a severe risk to creditors; Anil Agarwal-led firm immediately responded saying it’s selective misinformation and baseless’ aimed at discrediting the group
New Delhi: US short seller Viceroy Research on Wednesday released a report charging billionaire Anil Agarwal’s mining conglomerate to be ‘financially unsustainable’ and posing a severe risk to creditors, allegations which the group called ‘selective misinformation and baseless’ aimed at discrediting the group.
Viceroy said it was shorting the debt stack of Vedanta Resources, the parent company and majority owner of Mumbai-listed Vedanta Ltd, as it released the 85-page report.
Shorting debt, also known as short selling of bonds, is a trading strategy where an investor looks to profit from a decline in the price of bonds or other debt instruments. It involves borrowing the bond, selling it at the current market price, and then buying it back later at a potentially lower price to return to the lender, pocketing the difference as profit.
Vedanta stocks fell as much as 6 per cent following the report release, but recovered some losses. It was trading at Rs440.05 on the BSE at 14:00 hours, down 3.54 per cent over the previous close.
Calling Vedanta Resources Ltd (VRL) a ‘heavily indebted parent’, Viceroy said:“The entire group structure is financially unsustainable, operationally compromised, and poses a severe, under-appreciated risk to creditors”.
“VRL is a ‘parasite’ holding company with no significant operations of its own, propped up entirely by cash extracted from its dying host: Vedanta Ltd (VEDL),” it said.
To service its own debt burden, VRL is ‘systematically draining’ VEDL, 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,” the report added.
Responding to the report, Vedanta in a statement said: “The report is a malicious combination of selective misinformation and baseless allegations to discredit the Group.”
“It has been issued without making any attempt to contact us with the sole objective of creating false propaganda. It only contains a compilation of various information, which is already in the public domain, but the authors have tried to sensationalise the context to profiteer from market reaction,” it said.
