The shares of Vedanta were trading in the red on July 10, a day after the stock crashed over 8 percent intraday following American short-seller Viceroy Research's allegations regarding its parent company.
The shares of the company were down nearly 1.5 percent to hover around Rs 434.30 apiece, as seen at 11.34 am.
US-based short seller Viceroy Research on July 9 said that it has taken a short position on the debt of Vedanta Resources, saying that it resembles a 'Ponzi scheme'. It called the parent company of Vedanta a "parasite holding company with no significant operations of its own, propped up entirely by cash extracted from its dying host, Vedanta Limited".
Anil Agarwal-owned mining conglomerate is systematically draining Vedanta to service its own debt, Viceroy further said. "VRL's actions to meet its short-term obligations directly impair its creditors’ long-term ability to recover their principal, a situation that resembles a Ponzi scheme where Vedanta stakeholders, which include VRL creditors, are the 'suckers'," it added.
Vedanta shares had crashed over 8 percent intraday on July 9 after the report was published. The stock later made some recovery to close 3 percent lower. The recovery was fuelled after Vedanta issued a clarification, strongly denying the claims.
"Viceroy Research report is a malicious combination of selective misinformation and baseless allegations to discredit the Group," Vedanta said in a stock exchange filing. "It has been issued without making any attempt to contact us with the sole objective creating false propaganda. It only contains 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," added Vedanta.
"The timing of the report is suspect and could be to undermine the forthcoming corporate initiatives. Our stakeholders are discerning enough to understand such tactics. In fact, to avoid any responsibility – authors of the report have added various disclaimers that the report has been prepared for educational purposes only and expresses their opinions and are not statements of fact,” the company further said.
Notably, Vedanta is set to hold its Annual General Meeting (AGM) later today. Investors will actively await Chairman Anil Agarwal's speech, which may address the short-seller's allegations.
Hindustan Zinc shares were also trading in the red, after seeing a strong downturn yesterday. The American short-seller had alleged that Hindustan Zinc's resources are being "looted" through related-party deals with promoter-family owned companies and unjustifiable brand fees. "Vedanta's crown jewel may be its biggest liability," it said while speaking about Hindustan Zinc.
Also read: Our LIVE blog on stock market updates
Chris Griffith, the CEO of the base metals business of Vedanta Resources, has left the mining firm in recent days, Bloomberg reported. He was in charge of some of Vedanta's key assets like zinc mines in South Africa and neighboring Namibia. He was also the President of the firm's international business.
Moneycontrol couldn't independently verify the report.
Debt doesn't seem to be a challenge for Vedanta, and all its entities are self-sufficient, said Rakesh Arora, Managing Partner at Go India Advisors. Speaking to CNBC-TV18, Arora noted that the lenders wouldn't have approved the company's demerger if debt was a problem.
"Viceroy is two years late on Vedanta. The claims don't hold any ground now. I don't think there is fundamentally any any issue in Vedanta," he further told the publication.
"Vedanta has done phenomenally well in the last two-three years, and things will only get better hereon," he added.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
