Must-Reads on How Vedanta Is Draining Subsidiaries
If you’re still on the fence about what’s happening inside Vedanta limited or Hindustan Zinc, these two pieces should clear it up.
“Vedanta is Crippling HZL” – by Ashok Sharma (Countercurrents)
This isn’t just another opinion piece. Ashok Sharma is a former senior geologist and Planning Commission advisor — someone who understands both the mining sector and public policy.
In this article, he lays out how HZL’s cash is being systematically drained through excessive dividends to support Vedanta Resources’ offshore debt. He warns that this is undermining HZL’s ability to invest in exploration and long-term growth, and could even threaten India’s mineral security.
This is a credible voice, and it’s a wake-up call.
Financial Express: HZL Brand Fee Deal May Breach Shareholder Agreement
This article discusses that HZL’s ₹1,562 crore brand fee agreement with Vedanta may have been signed without government approval — a potential breach of the Shareholder Agreement signed during privatization.
If proven, this could trigger an event of default, giving the government the right to:
Buy Vedanta’s stake in HZL at a 25% discount, or
Force Vedanta to buy the government’s stake at a 25% premium.
This isn’t just a technicality — it’s a serious governance issue with real financial consequences. https://www.financialexpress.com/business/industry/vedantas-hzl-brand-fee-deal-under-viceroy-cloud/3918271/
Veteran journalist Sucheta Dalal – yes, the Sucheta Dalal who exposed the Harshad Mehta scam and is known for her pro-right, pro-markets stance – has now spoken out on the Vedanta–Viceroy saga. She is not anti-business – she’s pro-transparency and pro-investor protection.
If she is raising red flags, you better believe it’s serious. https://www.youtube.com/watch?v=lisKBstKljg
This is no longer about short-seller noise.
We now have credible journalists, financial analysts, and former government advisors all pointing to the same thing: HZL is being used to prop up a stressed parent company, and public shareholders are paying the price.
Turns out Vedanta Semiconductors Private Ltd (VSPL) isn’t building chips. It’s not even pretending to. It’s allegedly a fake commodities trading shell, created to funnel ₹2,500 crore through sham operations and dodge NBFC regulations.
Why? To send “brand fees” up to Vedanta Resources (VRL) during a liquidity crisis in April 2025. And when that was done, the same money was used to pay out dividends in May. All this while pretending to be a semiconductor company.
VSPL has zero real operations—just paper trades in copper, silver, and gold.
It’s structured to avoid RBI scrutiny by not being classified as an NBFC.
The whole setup needs 24 months of regulatory silence to work.
If regulators step in? Total wipeout for the lenders!
It’s a high-stakes shell game with real consequences for shareholders and lenders.
This is honestly unbelievable. Vedanta was out there claiming they were building semiconductors, but meanwhile, they were allegedly using that same company to funnel money offshore???
It’s scamming people. Indian banks, Indian investors, Indian markets, everyone’s being used, and the money ends up in London with Vedanta Resources. How has this been allowed to go on for so long? Huge scandal for Vedanta
Hi community, what’s everyone’s thoughts on this, that didn’t actually dismiss anything tho
I’m just trying to understand what this legal opinion actually changes. It’s from a former Chief Justice, sure, but it doesn’t seem to directly address any of the specific claims in the Viceroy reports. It feels like a general statement that doesn’t really move the needle.
Am I missing something here? Can we have a more assurance
I agree. The legal opinion feels more like a PR move than a rebuttal. It’s not from any current authority. But if you read it closely, it doesn’t actually challenge the substance of Viceroy’s findings. That’s what’s worrying no? The silence on the actual issues. The semiconductor thing caught my attention. I was happy about an Indian semiconductor company but it turns out to be all fake. I want some answers.
HZL paid out far more in dividends than it earned, borrowing to cover the shortfall. We estimate HZL’s FCF shortfall in Q1 to be ~ ₹3,600 crore ($371m).
HZL’s auditor, SR Batliboi, failed to investigate material concerns, relying entirely on management assertions while the company’s capital base deteriorated and governance collapsed.
Earnings Call:
HZL’s CEO Arun Misra credited offshore brand fees (paid in advance) as justifiable by past “risks” undertaken by Vedanta as a shareholder of HZL. This is preposterous.
No mention was made of HZL’s Serentica investment, a 30-year, 0.0001% coupon instrument with no voting rights: a direct cash transfer to the promoter outside the reach of creditors.
HZL’s exports of 93% pure silver sand to Fujairah Gold were downplayed or denied, despite disclosures in HZL’s own annual report. High-purity, near-finished metal is being sent to a refinery with a questionable track record.
Management promoted its R&D Venture, which spent just ₹34 ($4m) crore on R&D over 3 years, less than 2% of what it has paid in unjustifiable brand fees to its promoters over the same period.
ICRA & The Legal Opinion
ICRA reaffirmed HZL’s A1+ rating on the same day as the Q1 FY26 call, citing the “financial strength” of a company being pillaged by its Promoter group.
The legal opinion commissioned by VRL is an embarrassing PR document, not a defense. It does not refute a single allegation, fails to identify the actual securities we’re short, and relies entirely on attacking Viceroy’s character.
What is the rationale for paying more dividend than it earned??
And the one that I was most curious about was the brand fee, but seems they didn’t justify it well in the Q&A. I really expect a true answer for this, otherwise it is a solid scam!
Well, as expected, the short seller says that that legal opinion is an embarrassing PR document
HZL’s cash is also being drained by the UK parent company, GoI as the shareholder is misled by this structure. They should intervene immediately to stop this practice.
give us facts about the “boeing company”. everything you can find. do your research and prove to us that it’s a clean company. if you do that, we will believe you.
I can’t believe there are more companies in this group are being exposed.
In the report: Minova Runaya Private Limited is a 49% Promoter-owned entity, whose only business is to siphon cash from GoI-backed Hindustan Zinc Limited (HZL). Like Serentica Renewables, this parallel structure was established by the Promoter group to engage in margin theft and enjoy favorable, non-arm’s length arrangements from HZL, hidden from VRL’s creditors.
HZL has been Minova Runaya’s only customer since its inception.
HZL is contractually obligated to procure its entire requirement of ground support products from Minova Runaya. This is a promoter-mandated monopoly.
HZL bears the entire input cost risk for Minova Runaya. Pricing is governed by a formula-based mechanism indexed to steel, crude oil, and inflation, effectively guaranteeing Minova Runaya’s profits.
Viceroy Research has officially submitted a detailed complaint to SEBI, calling for a full investigation into Vedanta Ltd and Hindustan Zinc Ltd. The letter outlines how billions of dollars may have been siphoned off through questionable deals with promoter-linked entities like Minova Runaya and Serentica Renewables. This issue is finally no longer just online chatter or analyst speculation! It’s now in the hands of the regulator. If SEBI acts, it could lead to real consequences: audits, disclosures, and possibly enforcement.
Important in the letter, they pointed out Vedanta Resources is harming India’s public interests: Viceroy Research submitted the attached letter to various offices within the Securities and Exchange Board of India (SEBI), outlining our findings from the report “Vedanta – Limited Resources.” Despite the gravity of the issues raised, we received no response or acknowledgment.
We understand SEBI is reviewing the matter and trust they are treating these issues with the seriousness they deserve. However, given the lack of any public statements from SEBI, we are publishing the letter in the interest of transparency and public accountability.
This publication is also a direct response to baseless accusations made by Vedanta Resources and its representatives that we are malicious actors seeking to harm India. We categorically reject this narrative.
Community, this is a moment to stay alert, informed, and cautious.
The brand fees that you refer is not a scam. In fact GST authorities went after Mahindra for NOT having one.
Why the Mahindra GST Dispute Arose
The Mahindra GST dispute began when the department issued a Show Cause Notice over the brand usage fee charged to its group companies.
Initially, Mahindra & Mahindra did not charge its subsidiaries any fee for using the brand name. The GST department viewed this as a taxable service. Under GST law, even if no payment is made, a transaction between related parties is taxable.
After a GST investigation, Mahindra started charging ₹1 lakh per year. The department claimed this fee was too low and not at market value. It accused the company of undercharging to avoid GST.
To assess the actual value, the department used the Tata Sons model. It applied a 0.25% royalty rate on the group company’s turnover.
Out - sold the holdings today. cant sit and wait around for this ship to go down. If the claims are true, SEBI will start investigation and the share price will tank in the short run. Another Adani in the making, but with no govt support.
Thank you for explaining to me the case! I didn’t know much about the brand fee regulation until I saw the Vedanta brand fees. This case can be a reference but FYI, an new article was just published about this, you should have a look.
Mahindra’s brand fee was 1 lakh per year per entity and used 0.25% of turnover benchmark.
But Vedanta it self charged 3085 crore in just FY25, which is 15% of Vedanta ltd’s net income. And according to this new article, ED in 2023 forced the parent company to refund 1030 crore! That’s a completely different monetary brand fee level compared with this case. Shocking, anyone knows about this before?
