A new report by Viceroy Research has alleged that Vedanta routed a Rs 2,500 crore loan through a subsidiary—Vedanta Semiconductors (VSPL) — to manage internal liquidity needs while avoiding regulatory scrutiny.
In a new report dated July 18, the US-based short seller claimed that VSPL was used as a conduit to raise offshore funds, backed by a 1% stake in Hindustan Zinc (HZL) held by Vedanta. Viceroy alleged that despite being positioned as part of Vedanta’s semiconductor venture, VSPL engaged in paper-based commodity trading with minimal margins and no meaningful infrastructure or operational indicators typical of a trading firm.
Vedanta denies allegations, asserts regulatory compliance
“Vedanta strongly rejects the baseless allegations made in the report regarding Vedanta Semiconductors (VSPL). All business activities of VSPL have been transparently disclosed and are in line with statutory norms. Loans between VSPL and Vedanta were executed in full compliance with applicable laws, corporate governance standards, and both Vedanta and VSPL have consistently reported accurate loan terms, interest rates, and collateral in line with statutory norms,” Vedanta said in response to queries sent by FE.
According to the report, VSPL raised Rs 2,454 crore through 10% non-convertible debentures subscribed to by several foreign entities, including JP Morgan, Fort Canning Investments, and Bank of America’s Singapore branch. The funds were then loaned to Vedanta at a reported interest rate of 12%. Viceroy alleged that disclosures related to this loan differ between VSPL and Vedanta, including on collateral and interest terms.
Questions over collateral and semiconductor claims
It also raised questions about the legality and governance of using a government-linked public asset like HZL shares as collateral in a foreign borrowing arrangement routed through an entity with limited assets.
“The pledge of Hindustan Zinc shares was undertaken strictly under the relevant facility agreements, fully compliant with legal and regulatory requirements, and duly disclosed to stock exchanges. We encourage stakeholders to only rely on verified disclosures and audited financials,” Vedanta said.
The report further claimed that VSPL’s financial filings show no activity related to semiconductor manufacturing, and alleges that the company did not update statutory records to reflect a shift in business focus from electronics to commodities.