US-based short-seller Viceroy Research has accused Vedanta Group’s semiconductor subsidiary, Vedanta Semiconductors Pvt Ltd (VSPL), of being a ₹2,500 crore sham commodities trading operation. According to the report, VSPL conducted zero-margin paper trades in copper, silver, and gold—designed to avoid classification as an NBFC and facilitate offshore fund movement amid a liquidity crunch in April–May 2024.
Viceroy states those funds, raised via 10% NCDs secured by a 1% stake in Hindustan Zinc (HZL), were then transferred to Vedanta at 12% interest under opaque terms.
📊 Key Claims
- VSPL reportedly posted revenues of ₹416 crore from commodity trades despite having no visible inventory, logistics, or fixed assets—suggestive of wash trades.
- The report underscores inconsistencies in collateral and interest disclosures between VSPL and Vedanta Ltd, raising transparency concerns.
- Founders and auditors are alleged to be closely tied to the promoter group.
- Viceroy warns that regulatory scrutiny before FY27 could lead to a complete wipeout of offshore lenders.
🛡️ Vedanta Responds: Denies Allegations
Vedanta has strongly rejected all claims, calling them entirely baseless. The company maintains VSPL’s activities are fully compliant with Indian laws and reported in alignment with corporate governance standards. All inter-company loans, collateral pledges, and interest terms have, they assert, been transparently disclosed in audited financial statements.
🧾 Summary Table
| Aspect | Viceroy’s Claim | Vedanta’s Response |
|---|---|---|
| Nature of VSPL | Paper-only commodity trading with no semiconductor infrastructure | Fully compliant corporate entity |
| Loan Details | ₹2,454 cr NCDs → ₹2,500 cr loan to Vedanta Ltd via VSPL | Loans fully disclosed, terms reported accurately |
| Collateral | HZL shares pledged; mismatched disclosures | In line with SEBI/Companies Act norms |
| Regulatory Concern | Used to avoid NBFC classification and scrutiny | VSPL structured legally as non-NBFC entity |
| Governance Structure | Promoter-connected directors; audit quality flagged | Governance and audit follow statutory norms |
🔍 Why It Matters
- Backed by reputable global institutions like JP Morgan and Bank of America, the financing structure at the heart of this scheme raises questions about Vedanta’s disclosure practices and governance.
- VSPL was publicly positioned as a ₹1.66-lakh-crore semiconductor venture in partnership with Foxconn. But Foxconn severed ties in mid‑2023, and Viceroy states VSPL showed zero evidence of investment in manufacturing infrastructure.
- The controversy touches critical regulatory frameworks—FEMA, PMLA, GAAR, SEBI LODR, Income Tax Acts—highlighting potential legal exposure if allegations hold merit. Business Upturn
🧭 What to Watch Next
- Regulatory scrutiny: Will bodies like SEBI, RBI, NFRA, or Income Tax Authority investigate loan structuring and disclosures?
- Audit clarity: Audits of VSPL may be revisited for evidence of financial irregularities or wash trading.
- Investor sentiment: Markets may react sharply if the controversy escalates—especially around promoter assurances and loan transparency.
- Semiconductor project viability: With no visible semiconductor manufacturing momentum post-Foxconn exit, VSPL’s declared business model may face increasing skepticism.
🌐 Bottom Line
The Vedanta Semiconductor ₹2,500 crore scam allegations underscore a high-stakes clash between short-seller claims and corporate denial. While Viceroy paints a picture of regulatory evasion and shell operations, Vedanta insists all practices were legal and transparent. The unfolding of this dispute will hinge on regulatory responses, audit reviews, and investor confidence in one of India’s highest-profile conglomerates.
