Vedanta dismisses Viceroy’s allegations of semiconductor unit being a ‘Sham Operation’

THEBUSINESSBYTES BUREAU

NEW DELHI, JULY 20, 2025

The Vedanta Group has hit back strongly at fresh allegations by US-based short-seller Viceroy Research, which accused the conglomerate of using its semiconductor unit as a front for a complex commodities trading operation designed to bypass financial regulations and funnel funds during a liquidity crunch.

In its latest report, Viceroy claimed that Vedanta Semiconductors Pvt Ltd (VSPL), a subsidiary of Vedanta Ltd, was not functioning as a legitimate semiconductor venture but instead acted as a “sham commodities trading operation.” The report alleged that this structure was created to avoid classification as a Non-Banking Financial Company (NBFC) and to discreetly remit brand fees to Vedanta Resources Ltd (VRL), the UK-based parent company, during a critical financial period in April 2024.

According to Viceroy, the Mumbai-listed Vedanta Ltd used VSPL to secure short-term non-convertible debentures (NCDs) from offshore lenders, backed by its stake in Hindustan Zinc Ltd (HZL). These funds were then routed back to Vedanta Ltd through a loan structure disguised under VSPL’s operations, which allegedly involved paper-based trading of commodities like copper, silver, and gold on a zero-margin basis — tactics reminiscent of “wash trading”, the report stated.

In response, Vedanta issued a sharp rebuttal, labelling the accusations as “baseless” and asserting that all activities conducted by VSPL have been transparent and fully compliant with applicable legal and regulatory standards. “All business activities of VSPL have been transparently disclosed and are in line with statutory norms,” the company said in an official statement. It further clarified that the loans between VSPL and Vedanta Ltd were executed in strict accordance with corporate governance principles and duly reported in financial disclosures.

Viceroy’s report also warned that unless regulators intervene, the alleged sham setup may need to continue until at least FY27 to maintain the illusion and ensure loan repayments. “VSPL’s operational illusion needs 24 months of regulatory silence to fulfil its purpose,” the short-seller wrote, alleging that the regulatory leniency might expose offshore lenders to significant risk, potentially leading to a “total wipeout” if scrutiny is applied.

The Vedanta spokesperson countered these claims by urging stakeholders to rely only on audited financials and verified disclosures. “We strongly reject the baseless allegations made in the report regarding VSPL,” the company reiterated.

This marks Viceroy’s third salvo in its campaign against the Vedanta Group, which began earlier this month with a critical report accusing Vedanta Resources of “systematically draining” its Indian subsidiary. At that time too, Vedanta had dismissed the report as “a malicious combination of selective misinformation and baseless allegations” and noted that Viceroy had issued the report without any engagement with the company.

In its latest note, Viceroy countered that claim, stating it had formally raised queries with Vedanta on July 9 but had yet to receive any response. “For a company so quick to dismiss our findings, one might expect answers to be equally swift,” the firm said.