Vedanta and Hindustan Zinc Stocks Drop After Viceroy Report
Shares of Vedanta and Hindustan Zinc fell up to 8% following a critical report by Viceroy Research, which raised concerns about financial discrepancies and likened the parent company structure to a 'Ponzi scheme'. The report highlighted inflated assets, hidden liabilities, and governance issues, with Hindustan Zinc also under scrutiny for a default event. The report concluded that the group's financial situation is unsustainable and poses risks to creditors.
Shares of Vedanta and Hindustan Zinc dropped by up to 8% after US-based short-seller Viceroy Research published a report highlighting financial discrepancies in the group. Viceroy likened the parent company Vedanta Resources Ltd to a 'Ponzi scheme.' Vedanta Ltd fell by 7.7% and Hindustan Zinc by 4.8% on BSE.
Viceroy accused Vedanta Resources of siphoning cash from Vedanta Ltd to service its debt, leading to increased leverage for the operating company. The report claimed a $5.6 billion free cash flow shortfall at Vedanta Ltd over three years, used for oversized dividend payments demanded by VRL.
The report also alleged inflated asset values, hidden debt, artificial brand fees, and governance failures within the group. Even Hindustan Zinc faced accusations of defaulting on shareholder agreements and paying brand fees for unused brands.
Viceroy concluded that the Vedanta Group's financial structure is unsustainable and warned against the proposed demerger, stating it would spread insolvency across weaker entities.
According to the source: The Economic Times.
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