Vedanta shares fall after US short-seller alleges discrepancies in finances; firm says baseless

Mumbai, July 9 (IANS) Vedanta shares fell over 7 per cent during intra-day trading on Wednesday after a report by US short-seller Viceroy Research alleged that the conglomerate resembled a “Ponzi” scheme — a claim that Anil Agarwal-owned company has vehemently denied.

“The entire group structure is financially unsustainable, operationally compromised, and poses a severe, under-appreciated risk to creditors,” according to the short-seller report.

According to the US-based short seller, Vedanta Resources Ltd. is a holding company that relies on collecting money from Vedanta Ltd. to pay its debts because it doesn’t have any significant operations of its own.

This has weakened the value of the group’s main collateral by forcing Vedanta to take on more debt and deplete reserves, the report stated.

Based on data available on the BSE, the promoter holding in Vedanta as of March is 56.38 per cent.

“Vedanta Resources’ actions to meet its short-term obligations directly impair its creditors’ long-term ability to recover their principal,” the report said, adding that the situation resembled a “Ponzi” scheme.

The Viceroy claimed that in order to stay solvent, the group had deferred significant undisclosed liabilities and depended on new debt and accounting changes. It cautioned that the possibility of a group-wide insolvency event was no longer remote.

The report was released before the annual general meeting (AGM) of Vedanta on Thursday.

In a statement, Vedanta Group dismissed the short-seller report, calling it a “malicious combination of selective misinformation and baseless allegations” aimed at discrediting the group.

The company said the report was released without any attempt to seek a response from Vedanta and alleged it was created solely to trigger false market sentiment.

It claimed the report contains only a compilation of publicly available information, which has been taken out of context and presented in a misleading way to profit from the resulting reaction.

“The timing of the report is suspect and could be to undermine the forthcoming corporate initiatives,” a Vedanta Group spokesperson said in a statement. “Our stakeholders are discerning enough to understand such tactics.”

Meanwhile, after starting the session in green at Rs 461.0 against the previous session’s closing of Rs 456.30 on NSE, the scrip fell over 7 per cent to hit an intraday low at Rs 420.65 as selling pressure escalated over the Viceroy allegations.

At around 13.55, the stock was trading at Rs 439.95, down 3.58 per cent, recovering some of its losses.

Shares of Hindustan Zinc, a subsidiary of Vedanta Group, fell over 3 per cent during the early trading. The stock opened at Rs 437.30, up against the last closing price of Rs 436.20 on NSE. It dragged into negative territory post the Viceroy Research allegation, touching an intraday low at Rs 415.15.

At around 2:13 pm, the shares were trading at Rs 425.15, down 2.53 per cent or Rs 11.05.

–IANS

aps/na