Vedanta Refunds ₹1,030 Crore Brand Fee to Subsidiary Following ED Probe, Says Viceroy

As per news reports, Vedanta Resources Ltd has come under the spotlight once again following a new report by investigative firm Viceroy Research. 

The report alleges that VRL was compelled to refund ₹1,030 crore to its subsidiary Vedanta Ltd (VEDL) after being questioned by the Enforcement Directorate (ED) over intercompany transactions. This latest development has added fuel to the ongoing debate over transparency, governance, and financial practices within the Anil Agarwal-led conglomerate.

Brand Fee Rebate Sparked by ED Intervention

Viceroy Research claims that the ₹1,030 crore refund, termed a “brand fee rebate,” was a direct result of regulatory scrutiny initiated by the ED in July 2023. According to the report, the ED had summoned VEDL’s Chief Financial Officer and senior executives to clarify the nature and legality of payments made to the parent company.

 These payments, reportedly made without clear consistency or contractual clarity, were considered to be in violation of the Foreign Exchange Management Act (FEMA).

Details Omitted in Public Disclosures

The report alleges that the refund was not publicly disclosed in a timely manner. Although mentioned vaguely in the FY24 financial statements, there was no explanation or acknowledgement provided to bondholders or the broader market. 

Viceroy states that this omission undermines transparency and accountability, particularly given the significant quantum of the transaction.

Claims of Liquidity-Driven Transfers

According to Viceroy, the brand fees were not routine payments but rather irregular remittances made when the parent company, VRL, faced liquidity stress. The report claims that this mechanism operated more like an informal credit line, with no interest charged and no apparent commercial rationale. In essence, it accuses VRL of drawing funds from VEDL to meet its own debt obligations.

Key Resignations and Executive Appearances

One focal point of the report is the brief tenure of Sonal Shrivastava, who was appointed as CFO of VEDL and appeared before the ED shortly after taking charge. She resigned after five months. The report also notes that while she cooperated with the investigation, CEO Sunil Duggal did not attend the ED session, raising additional questions.

Significant Financial Outflows from VEDL

The Viceroy report claims that in FY25 alone, VEDL and its subsidiaries paid around ₹3,085 0crore in brand fees to the parent entity. This represented nearly 15% of VEDL’s annual net income. The report contends that these payments directly contributed to servicing VRL’s $4.9 billion net debt and $835 million in annual interest payments.

Read More: Vedanta Group Shares Rebound After Clarification on Viceroy Report! 

Viceroy's Broader Allegations

This is not the first time Viceroy Research has raised red flags regarding Vedanta. In a comprehensive 87-page report dated July 9, the firm accused VRL of systematically draining resources from its listed subsidiary. It labelled the group as being dependent on “unsustainable debt, looted assets, and accounting fiction.”

Vedanta’s Response to the Allegations

Vedanta Ltd issued a strong rebuttal, dismissing the report as “malicious” and filled with “selective misinformation and baseless allegations.” The company further criticised Viceroy for not reaching out for clarification before publishing the report and labelled the effort as an attempt to tarnish the group’s reputation through false narratives.

Conclusion 

This ongoing conflict between Viceroy Research and Vedanta Resources highlights the growing scrutiny on corporate governance, especially in large business conglomerates with complex intercompany structures. While the full facts may only emerge over time, the situation has already sparked important discussions around disclosure standards, regulatory oversight, and the ethical responsibilities of listed entities.

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