Proxy advisory firm InGovern Research Services has defended the Vedanta Group against allegations by US-based Viceroy Research, which were published on July 9 and triggered a kneejerk share selloff, by refuting the claims and highlighting regulatory gaps exploited by the foreign short seller.
Viceroy’s report had accused parent entity Vedanta Resources (VRL) of operating an unsustainable financial structure, likening it to a ‘parasite’ draining its Indian subsidiary - Vedanta - through excessive dividends, brand fee, and off-balance-sheet loans.
InGovern benchmarked Vedanta against global and Indian peers and advocated for stronger safeguards for shareholders.
InGovern outlined typical playbook of short-sellers - establishing short positions, publishing critical reports, amplifying findings via media to trigger panic and profiting from price declines.
While short-selling is a regulated, legitimate activity contributing to market liquidity and price discovery, InGovern said firms like Viceroy, unregistered with the Securities and Exchange Board of India (Sebi), operate outside Indian regulatory oversight, creating a gap. Sebi mandates registration and accountability for domestic research analysts but has limited recourse against foreign entities’ coverage of Indian markets.
Read More: Vedanta refutes Viceroy Research's allegations, calls report 'false propaganda'
InGovern drew parallels with the 2023 Hindenburg Research attack on the Adani Group, alleging accounting irregularities and governance lapses, which caused sharp stock declines and subsequent regulatory scrutiny.
Viceroy’s report accused Vedanta of unsustainable debt practices and questionable disclosures, eroding value for minority shareholders and creditors. However, InGovern warned that such reports - driven by financial motives - may present selective interpretations of public data, necessitating contextual analysis.
To address this, InGovern called for enhanced disclosure norms, cross-border regulatory cooperation, and investor education in an interconnected global market. The report also highlighted need for global scrutiny of short-sellers by authorities in the US, UK, and South Africa, to investigate manipulative practices and conflicts of interest.
Debt Servicing a Common Practice
InGovern defended Vedanta’s practice of servicing parent-level debt through subsidiary cash flows, a structure common in capital-intensive sectors like mining, infrastructure, and utilities.
Comparative analysis with global and Indian conglomerates:
Adani Group: Adani Enterprises and its subsidiaries’ upstream cash flows via dividends and inter-corporate loans service holding company debt, with less than 40 percent of total debt from Indian banks (CLSA, Jan 2023). Its net debt/EBITDA ranges from 2.5x to 4.0x, comparable to Vedanta’s 2.5x (FY25).
Tata Group: Tata Sons relies on dividends from subsidiaries like TCS (Rs 33,000 crore in FY24) to service debt and fund investments.
Glencore: The global miner’s parent company uses subsidiary dividends and management fees to service $29.6 billion in gross debt (FY24), with a net debt/EBITDA of 2.2x.
Anglo American: The UK/South Africa-based miner upstreams cash flows to service $10.2 billion in debt (FY24), with a net debt/EBITDA of 2.1x.
InGovern said such structures are standard for operational, regulatory, and tax reasons, allowing centralized debt management at favourable rates. Vedanta’s related-party transactions – at less than 2 percent of FY24 operating expenses - are transparently disclosed and audited by Deloitte and EY, with no recent regulatory penalties.
Financial and Governance Benchmarking
For FY25, Vedanta reported a net debt-to-EBITDA ratio of 1.2x, while parent Vedanta Resources stood at 2.5x. In comparison, Glencore recorded a net debt-to-EBITDA ratio of 0.78x in FY24, and Anglo American reported 1.3x. The Nifty 50 average for Indian large-cap corporates is approximately 1.8x.
Vedanta's five-year average dividend yield ranges between 6-7 percent, according to Morningstar and Reuters, significantly higher than Glencore’s 2.5-3.6 percent and Anglo American’s 4.08 percent. The Nifty 50 average dividend yield falls between 1.1 and 1.7 percent, based on data from the First Trust India NIFTY 30 ETF and NIFTY Equal-weight index.
Vedanta’s dividend payout ratio, between 45-50 percent annually, aligns with Glencore’s 50-60 percent (based on a $1.2 billion payout on $14.4 billion EBITDA) and Anglo American’s 40-60 percent (based on a $0.64 billion payout on $27.9 billion EBITDA). The Nifty 50 average payout ratio is around 30 percent.
In terms of liquidity, Vedanta held Rs 20,600 crore in cash and equivalents in FY25, with a net debt of Rs 53,230 crore. Glencore reported $2.1-2.4 billion in cash, with liquidity including credit lines at $11.5 billion, while Anglo American had $9.7 billion in cash and equivalents against a net debt of $10.6 billion.
Institutional shareholding in Vedanta ranges from 20-25 percent, per BSE/NSE filings, comparable to Glencore’s approximately 25 percent and Anglo American’s 30 percent.
These metrics underscore that Vedanta’s financial practices align with global and domestic standards in capital-intensive sectors.
Disclosure Norms and Market Volatility
Vedanta’s compliance with Sebi and Companies Act requirements ensures comprehensive disclosure of related-party transactions, inter-corporate loans, and dividend flows. The group’s FY24 annual reports and investor presentations detail these transactions, with audits by leading firms indicating no material issues.
InGovern attributed the sharp intraday share fall on July 9 to market’s over-reaction to Viceroy’s report.
Shareholder Resolutions and Demerger Support
InGovern’s role as a proxy advisor involves scrutinising Vedanta’s resolutions. It has supported routine proposals like financial statement adoptions and auditor reappointments when disclosures meet regulatory standards. However, it has opposed resolutions involving related-party transactions or capital allocation lacking transparency or justification for shareholder value, particularly during recent AGMs and EGMs.
The report urged shareholder and creditor support for Vedanta’s proposed demerger into five entities, approved in February 2025. InGovern views the demerger as a strategic move to enhance management focus and capital market access.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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