July 9, 2025 – Viceroy is short the debt stack of Vedanta Resources (VRL PropCo), the heavily indebted parent and majority owner of Vedanta Limited (NSE : VEDL). The entire group structure is financially unsustainable, operationally compromised, and poses a severe, under-appreciated risk to creditors.
The core of our investment thesis rests on a simple but critical dynamic: VRL is a “parasite” holding company with no significant operations of its own, propped up entirely by cash extracted from its dying “host”: VEDL.
To service its own debt burden, VRL is systematically draining VEDL, forcing the operating company to take on ever-increasing leverage and deplete its cash reserves. This looting erodes the fundamental value of VEDL, which constitutes the primary collateral for VRL’s own creditors.
Consequently, 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 VEDL stakeholders, which include VRL creditors, are the “suckers”.
This arrangement has pushed the entire group to the brink of insolvency, propped up only by a continuous cycle of new debt, accounting tricks, and the deferral of massive, undisclosed liabilities. New credit lines serve only to destroy the PropCo’s only collateral, staving immediate insolvency at the expense of any chance of creditors recovering principal. The mechanisms used to maintain the illusion of stability are failing, and a group-wide insolvency event is no longer a distant risk.
Our investigation has uncovered material quantitative and qualitative discrepancies in Vedanta group’s, many of which we believe are tantamount to fraud. Of note:
- Bait and Switch Funding Model – Vedanta Limited promotes ludicrous capital-intensive projects that it cannot afford in order to raise fresh capital. This capital is then paid out to the PropCo to service its debt.
- Irreconcilable Interest Expenses – Vedanta’s interest expenses vastly exceed its reported note rates, and continues to increase despite paydowns and restructuring.
- Inflated Asset Values – We evidence inflated asset values across VEDL’s large list of non-performing operating subsidiaries. The debt across these assets vastly exceeds their true value and is cross collateralized among the Group.
- CAPEX Fraud – Expenses across operating subsidiaries are systematically capitalized, artificially inflating profits and asset values. This is a material misrepresentation.
- Off-Balance Sheet Items – Billions of dollars of disputed expenses are kept off-balance sheet and undisclosed in financial reports.
- Governance Failure – Vedanta presents systematic governance failures across management and auditors, including inappropriate auditor choices.
To cure its maladies VRL has proposed a demerger of the entities it has rolled up through its decades-long acquisition strategy, which it now claims are more valuable individually.. This fails to address the fundamental cash crunch and will saddle the resultant companies with unsustainable debts from their inception.
VRL is a financial zombie being kept alive by transfusions of cash from its subsidiary VEDL. The short thesis is not death by a thousand cuts: Any one of the multitude of risks we outline is sufficient to topple Vedanta’s already fragile, Ponzi-like structure.