Vedanta Shares Tumble After Viceroy Calls It “Ponzi Scheme”

Vedanta shares dropped over 7% on Wednesday after US-based short-seller Viceroy Research released a report calling the company similar to a “Ponzi scheme”. Vedanta strongly denied these claims.

The report said Vedanta’s structure is financially weak and risky for lenders. It alleged that Vedanta Resources, which owns Vedanta Ltd., depends on taking money from its Indian unit to pay its debts, as it has no major business of its own. This has forced Vedanta Ltd. to borrow more money and reduce its cash reserves.

Viceroy also said Vedanta has delayed large hidden payments and is depending on new loans and accounting changes to stay afloat. It warned that the group could face insolvency in the future.

Vedanta responded by calling the report “malicious, misleading, and full of false information”. It said Viceroy did not contact them for their response and only wants to create panic in the market. The company said the report uses public information out of context to hurt its image, especially before its AGM on Thursday.

After the report, Vedanta’s stock, which opened higher at Rs 461.0 on NSE, fell sharply to an intraday low of Rs 420.65. Later, it recovered slightly to trade at Rs 439.95, down 3.58%.

Shares of Hindustan Zinc, a Vedanta subsidiary, also fell over 3% after starting the day strong. The stock dropped to an intraday low of Rs 415.15 and was last trading at Rs 425.15, down 2.53%.