On July 9, 2025, global short-seller Viceroy Research issued a detailed and controversial report targeting Vedanta Resources (VRL PropCo), the highly indebted parent and majority owner of Vedanta Limited (NSE: VEDL). The report sent shockwaves through the stock market, triggering a more than 6% drop in Vedanta Limited’s share price.

Viceroy’s core claim is that the entire Vedanta group structure is financially unsustainable, operationally compromised, and suffers from a deeply underappreciated risk to creditors. The report describes Vedanta Resources as a “parasite” holding company with no significant operations of its own, kept alive entirely by draining cash from its “host,” Vedanta Limited.

To service its own mounting debt, Viceroy alleges that Vedanta Resources is systematically draining VEDL, forcing the operating company to take on growing leverage and deplete its cash reserves. This depletion, it says, erodes the fundamental value of VEDL, which also serves as the primary collateral for VRL’s loans.

Viceroy argues that these actions jeopardize the long-term ability of VEDL’s creditors to recover their principal, likening the situation to a Ponzi scheme. The report claims that stakeholders, including those with exposure to VRL’s debt, are essentially left holding the bag.

Viceroy further alleges that the entire group has been pushed to the brink of insolvency. According to the report, the company survives only through a continuous cycle of new debt, questionable accounting practices, and the deferral of massive undisclosed liabilities. Viceroy claims that each new credit facility serves only to destroy the value of the group’s collateral and makes it harder for creditors to recover anything. It states that the mechanism meant to maintain the illusion of financial stability is failing, and that group-wide insolvency is no longer a distant threat.

In its investigation, Viceroy says it has uncovered a range of material quantitative and qualitative issues within the Vedanta Group. It highlights the following key red flags, which it says are tantamount to fraud:

• Bait and switch funding model: Vedanta Limited pursues capital-intensive projects that it cannot afford or intends never to finish. Capital raised for such projects is then diverted to pay down the debt of the parent company.

• Irreconcilable interest expenses: Vedanta’s reported interest expenses are significantly lower than what would be expected based on its outstanding debt and reported rates, indicating possible underreporting.

• Inflated asset values: The report points to inflated valuations of VEDL’s non-performing operating subsidiaries. Many of these assets, it says, are vastly overvalued and are cross-collateralized across the group.

• CAPEX fraud: Viceroy accuses Vedanta of artificially inflating profits and asset values by systematically capitalizing expenses across its subsidiaries.

• Off-balance sheet items: Viceroy highlights billions of dollars in disputed expenses and liabilities that do not appear on the group’s balance sheet and are undisclosed in financial statements.

• Governance failure: The report accuses Vedanta of systemic governance issues, including poor internal controls and questionable audit practices.

To address these structural weaknesses, Viceroy claims that VRL has proposed a demerger of some of its consolidated entities. The goal appears to be separating out individual companies to make them more attractive to investors. However, Viceroy asserts that this does not solve the group’s fundamental problem: a long-standing reliance on debt and aggressive roll-up strategies. It warns that the move will simply create smaller companies saddled with unsustainable obligations.

The report concludes that Vedanta Resources is a financial zombie, kept alive only through continuous cash infusions from Vedanta Limited. Viceroy warns that the short thesis is not dependent on one risk but a multitude, and that any one of those could be enough to topple what it calls an already fragile, Ponzi-like structure.

Following the report’s release, Vedanta strongly refuted the allegations. The company claimed that Viceroy made no attempt to reach out before publishing the report. In its official statement, Vedanta called the report a malicious mix of selective misinformation and baseless accusations. It further suggested that the timing of the report was suspicious, potentially designed to undermine upcoming corporate initiatives.

Vedanta also pointed out that the authors of the report included disclaimers stating that it was created for educational purposes only. The company urged stakeholders to stay focused on the business and its long-term growth plans, reiterating confidence in its financial and operational stability.

As both sides hold their ground, the market is left to digest the explosive claims and counterclaims. For investors, the immediate impact has been a steep correction in the stock, while long-term implications remain uncertain amid rising scrutiny.

Disclaimer: This article is for informational purposes only and should not be considered financial or investment advice. It is based on public reports and statements. Readers should conduct their own research and consult financial advisors before making investment decisions.