American short-seller Viceroy Analysis on Wednesday stated that the promoters of the Vedanta Group have been “siphoning margins” from listed group firm Hindustan Zinc Ltd (HZL) by supplying commodity items to it at inflated costs on an unique foundation.
It alleged that Minova Runaya Pvt. Ltd (Mrpl), a 49% promoter-owned entity, has an unique contract with HZL for the availability of merchandise together with resin capsules, rock bolting techniques and wire mesh. Utilized in mining, these merchandise are usually commoditized and low-margin, however MRPL was promoting them at a 30% mark-up to HZL, the short-seller alleged, including that the corporate does little manufacturing itself. HZL was MRPL’s solely buyer, Viceroy added.
“This firm (MRPL) has just one objective, to purchase commoditized merchandise, slap a 30% markup on them, after which promote them to a captured HZL,” the short-seller stated in its observe, including that there was “extra to return.”
Between FY21 and FY24, Minova Runaya made an mixture income of ₹553 crore with a revenue of ₹92 crore, the short-seller disclosed citing the corporate’s regulatory filings.
Vedanta, HZL Deny Fees
Vedanta has denied all allegations. “The stated quick sellers have persistently shared extraordinarily ill-informed ‘stories’ with deceptive data,” a Hindustan Zinc spokesperson stated. The most recent allegations disregard the “stringent” governance protocols adopted by Hindustan Zinc, the spokesperson stated.
Viceroy Analysis has printed 9 notes on Vedanta within the final fortnight. It has a brief place of undisclosed dimension on the debt of London-based group holding firm Vedanta Sources.
Hindustan Zinc’s shares gained 0.82% to shut at ₹446.9 apiece on the BSE on Wednesday. Vedanta Ltd’s shares settled 1.12% increased at ₹455.6 apiece. The benchmark Sensex closed 0.66% increased.
The 2 firms’ shares had fallen following the publication of Viceroy’s first report on 9 July, however have since recovered and never reacted to its subsequent eight stories.
MRPL’s possession, contract phrases
Whereas the Vedanta Group holds a 49% stake in MRPL, the remaining 51% stake within the firm is held by Minova Minetek, which is a Hyderabad-based producer of mining, quarrying and building gear, as per personal firm knowledge platform Tracxn.
“MRPL has a long-term gross sales contract with HZL, which gives it with robust income visibility,” Crisil Scores famous in November 2024, when it rated HZL’s long-term debt as A- with a steady outlook.
“As per the contract, HZL should procure its complete floor assist product requirement from MRPL. This ensures wholesome utilisation for the manufacturing capacities of MRPL,” the ranking company had famous.
MRPL was onboarded by Hindustan Zinc as a dependable provider for floor assist after present process due screening processes and approvals from the Audit Committee and Board, as per the corporate spokesperson. The corporate has developed options that meet the distinctive specs and requirements of Hindustan Zinc’s underground mines, they stated. Transactions with MRPL have been supported by benchmarking by impartial companies, they stated.
Crimson flags in MRPL’s books
Relating to the shortage of MRPL’s manufacturing capabilities, Viceroy famous that the corporate’s accounts acknowledge that it manufactured nothing till at the least FY24.
“Even then, the one product it manufactured was wire mesh, a product so easy and low cost {that a} totally automated line may be arrange for beneath ₹1 crore,” the short-seller stated.
Viceroy additionally pointed to some discrepancies within the monetary statements of MRPL. For example, earnings from HZL accounted for 114% of MRPL’s income in FY24. The identical yr, MRPL declared ₹216 crore of tangible asset gross sales whereas solely carrying ₹66 crore of tangible belongings on its steadiness sheet. These discrepancies have been persistently noticed in previous years too.