A new controversy has erupted around the Anil Agarwal-led Vedanta Group. Viceroy Research, a US-based investment research firm, has leveled serious allegations of financial irregularities against Vedanta Resources Limited (VRL) and its Indian unit, Vedanta Limited (VEDL).
Viceroy Research's report claims that Vedanta Limited transferred ₹1,030 crore to its parent company, Vedanta Resources, under the guise of "brand fees," which was later shown as a rebate.
ED Investigation and Official Questioning
Viceroy Research also claims that in July 2023, the Enforcement Directorate (ED) questioned Sonal Srivastava, the then Chief Financial Officer (CFO) of Vedanta Limited, regarding this brand fee transfer.
According to the report, Sonal Srivastava cooperated with the investigation, while the company's CEO, Sunil Duggal, did not appear before the ED. The report further states that Srivastava resigned from her position five months after this incident.
Report Highlights Lack of Transparency in Financial Documents
Viceroy Research states that information about this entire fund transfer was not disclosed to the market or to the company's bondholders. The company did not provide a clear breakdown of this amount in its financial year 2023-24 report, raising serious questions about transparency.
The report also stated that the transaction process was not in accordance with corporate governance standards and also violates the Foreign Exchange Management Act (FEMA) regulations.
Used as an Interest-Free 'Credit Line'
Viceroy also alleges that the brand fee was used as a kind of interest-free 'credit line'. That is, whenever Vedanta Resources needed money, Vedanta Limited and its subsidiaries would send funds in the name of brand fees.
According to the report, in financial year 2024-25, Vedanta Limited and its associated companies paid approximately ₹3,085 crore in brand fees to VRL. This is about 15 percent of Vedanta Limited's total revenue.
Viceroy alleges that this amount was used to meet the parent company's total debt of $4.9 billion and annual interest liability of $835 million.
Serious Allegations Previously Leveled
This is not the first attack from Viceroy Research. In an 87-page report released on July 9, Viceroy described Vedanta Resources as a "parasitic company." That report stated that Vedanta Resources was misusing the resources of its subsidiaries in order to pay off its debts.
The report also alleged that there were significant irregularities in the company's balance sheet and that assets were misrepresented.
Vedanta's Rebuttal: Report Motivated by Malice
Vedanta has denied all these allegations, stating that Viceroy Research's report is entirely based on false facts and fabricated figures. The company has alleged that the report was prepared with the intention of damaging its image.
Vedanta says that Viceroy neither contacted the company nor sought any clarification before issuing the report. Vedanta clarified that all its financial transactions are conducted in accordance with rules and procedures.
Reference to Former Chief Justice of India in the Report
Given the seriousness of the allegations made by Viceroy Research, this matter has become a subject of widespread debate. The report also mentions that former Chief Justice of India, DY Chandrachud, had described Viceroy's report as unreliable. However, the context and interpretation of this statement were not clearly stated.
Questions Raised on Financial Transactions and Corporate Ethics
This entire matter has once again sparked a debate on corporate governance and the operations of multinational companies. When a large and reputable company faces allegations of financial irregularities, lack of transparency, and investigations by regulatory agencies, investor confidence is also affected.
