This article says exactly what I always wanted to say. Many institutional investors and us retail investors have seen the debt burden and other red flags already. The thing is it’s been so many years, no regulators came out and solve the misconduct of the company and this keeps going, when is it gonna stop?
https://www.livemint.com/mint-top-newsletter/companyoutsider.html?webview=true
Why no one blows the whistle until a short-seller turns up
Below is taken from the article:
The reaction to US-based short seller Viceroy Research’s scathing report on the Vedanta Group was as predictable as it was performative. The company, not surprisingly, called the allegations “baseless”. There was also the familiar barrage of nationalist rhetoric summed up by former Rajya Sabha MP and BJP national executive member Swapan Dasgupta, who tweeted: “Is there a concerted attempt by dodgy US financial entities.research organisations to undermine India’s corporates/financial institutions?”
But strip away the outrage, and the uncomfortable question remains: why did it take a foreign short-seller to say what no one in India’s financial ecosystem had the courage or incentive to? After all, as Vedanta’s CEO Deshnee Naidoo admitted, the points raised in the report are not new and have been previously disclosed to shareholders.
Viceroy’s dossier alleges opaque structures, questionable related-party transactions, and fragile debt positions across the sprawling Vedanta empire. You don’t need to agree with every bit of the report. The key issue is that in a market ecosystem populated by regulators, exchanges, research analysts and institutional investors, why was such scrutiny absent until a short-seller showed up?
The discomfiting answer is the lack of incentives. Reviled they may be, but short sellers are among the few market participants who have a genuine incentive to unearth problems inside companies. Since they make money when stock prices of their target companies fall, they are financially motivated to find what others ignore. Their motives are certainly not altruistic, but they drive the kind of transparency and accountability that almost all other market players shy away from.
Of course, short-sellers can be wrong. They exaggerate, cherry-pick and even manipulate. But their work, when rooted in data and grounded in fact, performs a critical function. They are often the only ones willing to publicly accuse a company of fraud — because they have the most to gain if they’re right, and the most to lose if they’re wrong.
Could the questions that Viceroy posed to Vedanta have been asked by its independent directors? Or its bankers? Or rating agencies? Or large institutional shareholders (foreign institutional investors (FIIs) and domestic institutional investors (DIIs) who together hold over 27% stake in Vedanta Ltd)? Possibly. But the brutal truth is that for none of them did the risk-reward trade-off make sense.
Any thoughts on this everyone?
