Vedanta – Auditors Turn a Blind Eye to The Facts – Viceroy Research
Viceroy Research exposes Vedanta Limited's ₹8,000 crore accounting fraud, revealing systematic financial manipulation, fabricated revenues, auditor negligence, and complex related-party transactions across multiple subsidiaries.
Quick Summary: Viceroy Research has published a damning 2025 report alleging widespread accounting fraud, fabricated transactions, and systematic auditor negligence across Vedanta Limited and its subsidiaries. The report documents over ₹8,000 crore in questionable assets, fabricated revenue streams, and related-party schemes designed to extract liquidity from government-backed entities while inflating financial metrics.
- Ticker: VEDL (NSE), VED (LSE)
- Position Disclosure: Viceroy Research maintains a short position in Vedanta Limited
- Report Type: Bearish equity research focused on accounting irregularities and corporate governance failures
Core Thesis
- Systematic Accounting Fraud: Viceroy alleges pervasive violations of Indian Accounting Standards (Ind AS) across multiple Vedanta entities, including fabricated asset sales, improper revenue recognition, and failure to impair worthless assets
- Auditor Negligence: Major subsidiaries received "clean" audit opinions despite material breaches, with small local audit firms lacking capacity to properly oversee multibillion-rupee operations
- Related-Party Extraction Schemes: Complex web of promoter-controlled entities used to extract liquidity through fabricated transactions, including ₹543 crore in non-existent "asset sales" by Minova Runaya to Hindustan Zinc
- Serentica OCRPS Manipulation: ₹1,956 crore in suspicious preference shares with 0.0001% coupons and 30-year conversion terms used to funnel cash to promoter vehicles
- Vedanta Semiconductors Revenue Fabrication: ₹416 crore in "trading revenue" reported despite having no operational facilities, inventories, or genuine business activities
- Impairment Failures: Over ₹1,100 crore in disputed receivables and non-operational assets carried without proper impairment, including the defunct Skorpion Mine
Key Revelations
- Environmental Penalty Alchemy: ESL Steel capitalized ₹688 crore in environmental and afforestation penalties as "productive assets" despite transferring them immediately to the Forest Department
- The Skorpion Mine Mirage: Management has repeatedly promised restart dates for the collapsed Skorpion Mine since 2020, pushing timelines from "October 2020" to "2027" without credible rehabilitation plans
- Semiconductor Trading Without Semiconductors: Vedanta Semiconductors reported a staggering 30,994% year-over-year revenue increase while operating no facilities and maintaining zero inventory
- The 0.0001% Coupon Mystery: Serentica issued preference shares with virtually no yield and conversion rights only after 30 years - terms that lack any commercial rationale
- Brand Fee Circular Funding: Undisclosed "brand fee" transfers between Vedanta entities function as interest-free loans to artificially support liquidity and asset values
- Audit Firm Musical Chairs: Critical subsidiaries audited by small local firms with limited international experience, raising questions about capacity to handle complex multinational operations
FAQs
How does Viceroy Research position this report in terms of their investment stance?
Viceroy Research maintains a short position in Vedanta Limited, meaning they profit if the stock price declines. This bearish equity research is presented as supporting their investment thesis that the company's shares are overvalued due to the alleged accounting irregularities and governance failures.
Over ₹8,000 crore in questionable assets and transactions, including ₹1,956 crore in suspicious Serentica OCRPS instruments, ₹1,100+ crore in unimpaired disputed receivables, and ₹543 crore in fabricated asset sales between related parties.
What are the potential consequences if these allegations are proven?
Violations of multiple Indian Accounting Standards (Ind AS), including Ind AS 1 (financial statement presentation), Ind AS 16 (property and equipment), Ind AS 24 (related party disclosures), Ind AS 36 (asset impairment), Ind AS 109 (financial instruments), and Ind AS 115 (revenue recognition).
Companies Act 2013 (Sections 129, 133, 188), CARO 2020 audit requirements, and SEBI LODR regulations regarding related-party transaction disclosures. Aside from potential breaches of RBI, ICAI, and NFRA guidelines.
How significant is the Vedanta Semiconductors revenue fabrication claim?
Skorpion Mine in Namibia has been non-operational since 2020 despite repeated management promises of restart dates. Vedanta has failed to properly impair its ₹5,300 crore investment in THL Zinc Ventures and ₹2,495 crore in related OCRPS, despite the mine having no credible restart plan.
What is the Minova Runaya fabricated asset sales allegation?
Minova Runaya reported ₹543 crore in "tangible asset sales" to Hindustan Zinc over four years, yet the company's total PPE is modest and HZL's accounts show no corresponding purchases. The report suggests these are paper transactions designed to justify cash transfers between related entities.
What role do auditors play in these alleged irregularities?
Auditors across multiple Vedanta subsidiaries issued "clean" opinions despite material accounting breaches, showing lack of professional skepticism and capacity. Viceroy notes that several entities are audited by small local firms that may lack the resources and expertise to properly audit multibillion-rupee operations.
How does the Serentica OCRPS scheme allegedly work?
Serentica Renewables issued ₹1,956 crore in Optionally Convertible Preference Shares to Vedanta entities with a 0.0001% coupon rate and conversion rights only after 30 years. Viceroy argues these instruments lack commercial substance and are designed to extract cash from listed entities to promoter-controlled vehicles.
Why is it significant?
If investigations confirm the alleged irregularities, potential consequences could include regulatory enforcement actions, restatement of financial statements, investor lawsuits, and significant negative impact on stock price performance. The report suggests the systematic nature of alleged violations could trigger cross-border regulatory scrutiny.
*Viceroy Research has disclosed maintaining a short position in Vedanta Limited. All allegations and claims referenced above are attributed to Viceroy Research's analysis and have not been independently verified. Readers should consult the full original report and conduct their own due diligence before making investment decisions.*
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This summary is based on a report by Viceroy Research.
For the full, detailed analysis, please refer to the original source material: https://viceroyresearch.org/2025/10/14/vedanta-auditors-turn-a-blind-eye-to-the-facts/