Vedanta AGM: These are the questions short seller Viceroy wants analysts to ask

The 87-page report made serious allegations against the Vedanta Group, including financial misconduct and misrepresentation, manipulating asset prices, raising off-balance sheet loans, and corporate governance lapses. The Vedanta Group has denied any wrong-doing, and called report a sensationalisation of publicly available information.

However, Viceroy is not making things easy for Agarwal. On Wednesday it shared a list of 37 questions with sell-side analysts covering the company, a copy of which Mint has seen.

Here are the top questions that Viceroy wants analysts and investors to ask Vedanta.

• What tangible services justify Vedanta Ltd (VEDL) paying Vedanta Resources (VRL) $1.16 billion for brand fees and strategic services over the last four years when VRL has no London staff, the office is ‘to let’ and none of VEDL’s subsidiaries make substantial use of the Vedanta brand?

Conext: VEDL pays 3% of its revenue as brand fee to VRL, as per an investor presentation from the latter. The rate is 1.7% for Hindustan Zinc Limited (HZL) and between 0.75-3% for other subsidiaries.

• Why do you make substantial brand fee overpayments each year, amounting to interest-free rolling credit to VRL, and how does any of this benefit VEDL and HZL shareholders (including the government of India)? How much has been advanced so far this year from VEDL and its subsidiaries including HZL? Please could you share the forecast turnover on which these payments were based?”

Context: VEDL and HZL pay brand fees to the parent at the start of the year, based on revenue projections. If the actual revenue during the year is below projection, VRL returns the excess. There is no interest charged on these payments.

• Why does VEDL continue to pay dividends while running a cumulative free cash flow deficit of $5.6 billion over the past three years?
• Are there any off balance-sheet debts, revolving credit facilities, or intra-period loans not disclosed in annual reports? Why has the effective interest rate at VEDL jumped to 12.7%, when weighted average rates imply 9.1%? What explains the $368m interest expense discrepancy?
• Why did VEDL purport to continue marketing a steel sale from October 2023 through to June 2024, despite halting internal efforts in Q3 FY24? Was this done to mislead creditors during the private credit facility raise and liability management exercise? Why were the lenders told that the asset sale was imminent and the debt restructuring was a ‘bridge to asset sale’?

Context: Vedanta Resources conducted a bond restructuring in late 2023 and early 2024 under which it delayed the maturity of many of its outstanding commercial papers with a cumulative principal of about $3.2 billion. The exercise was done to reduce its immediate interest and loan repayment burden. It raised $1.25 billion from a private credit facility to pay the bond restructuring fees.

The company had put on the block its domestic iron ore business, assets in Liberia, and its steel unit ESL Steel Ltd to pay the principal while brand fees from operating companies were to service interest payments. However, the sale has not been made so far.

• How does the VEDL board justify continued investment announcements (e.g., semiconductors, nuclear, glass) when existing projects remain incomplete and underfunded?
• As there is no credible path to monetising the international zinc and (domestic) power assets, why are they sitting on the balance sheet at such inflated values?
• As the CEO of VRL, why are you (Deshnee Naidoo) in attendance at the VEDL AGM and earnings calls? Is it because VRL’s interests take priority over those of VEDL and its shareholders?

Context: Naidoo took over as the CEO of London-based VRL in January 2025, according to her LinkedIn profile. She is based in Canada.

• What is the VEDL board’s explanation for the wave of senior executive departures since the demerger announcement, and how is succession being managed?
• How do you (promoters) justify encumbering the operations of VEDL so that VRL can borrow money at the expense of VEDL minority shareholders? How do you justify subjecting VEDL to creditor covenants (e.g. dividend restrictions, merger approvals) in offshore debt agreements to which VEDL is not a party?

What has Vedanta said?

The Vedanta Group has categorically denied all of Viceroy’s allegations.

In a statement, it said the Viceroy report was “a malicious combination of selective misinformation and baseless allegations to discredit the group. It has been issued without making any attempt to contact us with the sole objective (of) creating false propaganda.”

The report was a mere compilation of publicly available information, it added, “but the authors have tried to sensationalise the context to profiteer from market reaction”.

Vedanta also cast suspicion upon the timing of the report, which was released just a day before the VEDL AGM. The report could be an effort to “undermine the forthcoming corporate initiatives,” it said, likely referring to the ongoing demerger of Vedanta Limited into five separately listed companies.