Key Takeaways
- Viceroy Research labels Vedanta Semiconductors a ‘sham’ operation to circumvent financial regulations.
- Vedanta Group denies allegations, asserting compliance with legal and corporate governance standards.
- Viceroy warns that Vedanta Semiconductors may face scrutiny as loans come due in FY27.
Allegations Against Vedanta Semiconductors
Viceroy Research has issued a report claiming that Vedanta Semiconductors, a subsidiary of the Vedanta Group, operates as a deceptive commodities trading entity to evade classification as a non-banking financial company. The firm asserts that this structure was created to facilitate the remittance of brand fees to Vedanta Resource Limited (VRL) amid a financial crisis expected in April 2025. Vedanta has refuted these claims, labeling them as ‘baseless.’
The report suggests that Vedanta Semiconductors was reactivated not as a genuine semiconductor venture but as a low-profit trading entity engaged in paper-based commodity transactions. Viceroy Research indicates that this approach allowed Vedanta Semiconductors to take out short-term loans from offshore lenders and subsequently remit these funds back to Vedanta as a 24-month loan.
The analysis states that Vedanta Semiconductors, while appearing to be an active operating entity, would experience less scrutiny regarding loan repayments under regulatory frameworks such as the Foreign Exchange Management Act (FEMA), Companies Act, Prevention of Money Laundering Act (PMLA), and Anti-Money Laundering (AML) regulations.
In response, a spokesperson for Vedanta emphasized that all loans between Vedanta Semiconductors and Vedanta Limited are compliant with applicable laws and corporate governance standards. Furthermore, the spokesperson asserted that both entities have consistently reported accurate loan terms, interest rates, and collateral as required.
Viceroy’s report warns that Vedanta Semiconductors may have to sustain these questionable operations until FY27, when the loans come due and repayments must be processed. The research firm cautions that any regulatory intervention at Vedanta Semiconductors could lead to significant consequences for the lender group, potentially resulting in a total loss of investments.
As the situation unfolds, the credibility of Vedanta Semiconductors within the financial landscape remains under scrutiny, spotlighting the challenges the Vedanta Group faces amid these allegations.
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