New Delhi: While Vedanta Group has claimed that the US short-seller Viceroy Research's report flagging the companies' "unsustainable debt" is "malicious" and rests on "misinformation", shares of Vedanta Limited plunged by 8.7 per cent to Rs 421 intraday on the back of the allegations.

Vedanta Resources Limited is a globally diversified natural resources company owned by Indian billionaire Anil Agarwal.

Viceroy Research LLC are an investigative financial research group registered in Delaware, USA. The group's website claims that its research reports are prepared for educational purposes only and expresses authors' opinions.

On Vedanta, the group wrote: "The entire group structure is financially unsustainable, operationally compromised, and poses a severe, under-appreciated risk to creditors."

The 87-page report released on July 9 claims that Vedanta Resources Limited (VRL) is a “parasite” holding company "with no significant operations of its own, propped up entirely by cash extracted from its dying “host”, Vedanta Limited (VEDL)."

It wrote: "To service its own debt burden, VRL is systematically draining VEDL, forcing the operating company to take on ever-increasing leverage and deplete its cash reserves. This looting erodes the fundamental value of VEDL, which constitutes the primary collateral for VRL’s own creditors."

It further says that VRL’s actions to meet its short-term obligations directly impair its creditors’ long-term ability to recover their principal, and describes the situation as one that "resembles a Ponzi scheme where VEDL stakeholders, which include VRL creditors, are the “suckers”."

In a media statement quoted by the Indian Express, the Vedanta Group described the Viceroy report as “a malicious combination of selective misinformation and baseless allegations,” issued with the sole objective of creating false propaganda, and “without making any attempt to contact” the Group.

“It only contains compilation of various information — which is already in the public domain, but the authors have tried to sensationalise the context to profiteer from market reaction. The timing of the Report is suspect and could be to undermine the forthcoming corporate initiatives,” the Vedanta statement said.

As per the data from stock exchanges reported on by Business Standard, the promoter holding via various companies in Vedanta is 56.38% as of March. It is to be noted that most of the shares held by the promoters are pledged to their creditors.

The Wire is now on WhatsApp. Follow our channel for sharp analysis and opinions on the latest developments.