A short-seller's report is stirring fresh trouble for Vedanta, raising sharp questions about its handling of Hindustan Zinc Ltd (HZL)—a company where the Indian government still owns a hefty 29.54% stake.
In a report released on July 10, UK-based short-seller Viceroy Research claimed that HZL’s payments to its promoter lacked any commercial reasoning. It went a step further, suggesting that Vedanta may have breached its original shareholder agreement with the Centre—potentially triggering financial consequences running into billions of dollars.
The key allegation revolves around a contract clause linked to the Kapasan smelter project. According to Viceroy, Vedanta, through Sterlite Opportunities and Ventures (now part of Vedanta), had agreed to build a new smelter but allegedly failed to deliver. If that’s true—and if the government chooses to act—it could invoke a put/call option.
This option, buried in the original deal, would let the Centre force Vedanta to buy out the government’s stake in HZL at a 50% premium. Alternatively, the Centre could demand Vedanta sell its majority stake—64.92%—at a 50% discount. Either move could cost Vedanta dearly. Viceroy estimates the potential damage at $10.66 billion, or about ₹88,800 crore.
What’s more, these developments come at a time when scrutiny around brand fee payments by HZL to Vedanta has also been flagged, raising fresh concerns around corporate governance and related-party transactions.
Vedanta, however, pushed back. A company spokesperson said the Kapasan project was dropped following an independent economic evaluation which found it unviable. Instead, HZL went for a more affordable brownfield expansion at Chanderiya.
This, the company says, was not only approved by the full board—including directors nominated by the Centre—but also communicated to the Ministry of Mines in both 2003 and 2005. “No objections were raised then,” Vedanta added, pointing out that since acquisition, HZL’s production capacity has multiplied nearly fivefold.
With government-appointed directors on HZL’s board at the time, the ball is now firmly in the Centre’s court. Whether the Ministry of Mines chooses to act on Viceroy’s findings—or considers the matter closed due to earlier approvals—remains unclear.
Still, the tone of the report is likely to raise questions about how actively the government monitors its stake in former public sector units, especially in cases where strategic partners take the reins.
If nothing else, this report has once again brought to light the thin line between operational autonomy and contractual accountability in public-private partnerships—and the high financial stakes involved when things get murky
