US$900m Loan, Write-backs and Pledged Assets: Viceroy Alleges Vedanta Used ‘Creative Accounting’ To Fund US$2bn Dividend

Moneylife Digital Team 12 September 2025

Economy & Nation

US short-seller Viceroy Research LLC has accused Vedanta Resources Ltd (VRL) of engineering a complex set of transactions to fund its hefty dividend payout in FY23-24, allegedly circumventing Reserve Bank of India (RBI) restrictions and risking public shareholder assets in the process.

In a report titled "Vedanta – The Dividend Distortion", Viceroy claims that Vedanta Ltd (VEDL), the India-listed subsidiary of VRL, was only able to distribute its Rs16,798 crore (or about US$2.03bn- billion) dividend by tapping a controversial US$900mn (million) loan, reversing impairment losses and pledging stakes in Hindustan Zinc Ltd (HZL).

According to the report, Vedanta Zinc International (VZI) borrowed US$900mn from Oaktree Capital and JP Morgan, secured not against its struggling mining assets but against guarantees and collateral provided by VEDL. This included a corporate guarantee worth US$980mn and a 3.3% stake in Hindustan Zinc, valued around US$530mn at the time.

“These assets were essentially worthless on their own. The loan was, in substance, secured and repaid by Vedanta Ltd, not its subsidiaries,” Viceroy alleged.

VEDL also reversed write-offs worth US$360mn related to optionally convertible redeemable preference shares (OCRPS) in its subsidiary THL Zinc Ventures, the short-seller says, adding, "The reversal inflated standalone profits, converting negative distributable reserves into positive territory, and making the dividend payout appear permissible."

overseas direct investment (ODI) framework, setting what it calls a 'dangerous precedent' for Indian corporates.

“RBI risks undermining decades of regulatory safeguards if such transactions go unchecked,” the report says.

The research note further points out that Vedanta may have breached its shareholder agreement with the government of India (GoI) by pledging shares of Hindustan Zinc, where the Indian government continues to hold a significant stake. Under the agreement, Vedanta is required to notify the government before any such pledge – raising questions on compliance.

Beyond the dividend controversy, Viceroy highlights the mounting debt burden across Vedanta’s subsidiaries. THL Zinc Ventures, which borrowed heavily to fund the OCRPS redemption, is now saddled with nearly US$800mn in debt and annual interest obligations of US$76mn, leaving its core assets underfunded.

“The promoter group’s unending need for cash to meet debt repayments not only drains Vedanta’s operating assets but also forces the company into regulatory grey zones,” Viceroy alleged.

The report concludes by urging Indian regulators, including RBI and the government, to review Vedanta’s financing structures and its use of pledged public assets. It also invited whistle-blowers with information on the group’s financial practices to step forward, promising to act as intermediaries to safeguard their identities.

Viceroy Research has a history of releasing critical reports on listed entities worldwide, often leading to intense debates between the firm, regulators, and target companies. As of now, Vedanta has not issued a formal response to the fresh allegations.

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