Vedanta Resources will 'default' in the near future, short-seller Viceroy says

Viceroy Research, the short-seller, who issued a report on Anil Agarwal-owned mining conglomerate Vedanta, believes that the parent company of the listed entity will default on its repayments in the near future.

"Yes, we are," Gabriel Bernarde, Co-Founder of Viceroy Research told CNBC-TV18 in an exclusive interaction on Thursday, July 10, when he was asked whether he expects Vedanta Resources to default anytime in the near future.

"We believe the best outcome for the stakeholders of Vedanta Ltd, that includes the creditors of Vedanta resources, because their collateral is basically the equity of Vedanta Ltd., is to take this business away from from a group that is effectively pillaging this business for its own needs. Vedanta is run by a majority shareholder for their exclusive benefit. It doesn't it doesn't align with the goals of minority shareholders," Bernarde said.

On Wednesday, Viceroy Research had flagged material discrepancies in Vedanta Group's financials.

"The entire group structure is financially unsustainable, operationally compromised and poses a severe, under-appreciated risk to creditors," Viceroy's note said.

In their clarification, Vedanta Group stated that the report is malicious and that it is a way to spread false propaganda ahead of a corporate action that the group is set to undertake.

Vedanta's statement also said that the short-seller did not reach out to the company to seek their stance before publishing this report.

"No, we don't engage with with management. We believe every information that shareholders should know is available online. And you know, given the what we've uncovered, it's it's clear to us that we believe that they're habitually untruthful," Viceroy's Bernarde said.

Viceroy's report highlighted that the although the conglomerate's net debt has seen a decline from the elevated levels seen a few years earlier, their interest costs continue to remain high.

Vedanta also questioned the timing of the research report. When asked about whether Viceroy was late in issuing its report on Vedanta as the situation was worse a few years ago, here's what he said:

"Two years ago, Vedanta Ltd. was in a far better position in the sense that its interest payments were substantially lower. The effective interest rate has almost doubled since 2022 meaning that although you know, you can look at the debt whichever way you like, the free cash flow that that supports interest payments has been has taken a massive hit, because the cost of this debt has exploded."

Bernarde has also warned that there is more to come on Vedanta and more reports are likely to be released in the future.

Shares of Vedanta are trading 1.3% lower at ₹434.7, after the stock fell as much as 8% on Wednesday, before recovering to end 3.3% lower.