Vedanta siphoning off money

Kyam Capital, one of the minority shareholders in Vedanta Ltd. has asked the company to recall a $956mn loan to units of its parents (which represent 40% of the market value of Vedanta Ltd. equity held by minority shareholders.  The loan represented an improper transfer of value away from minority shareholders to Agarwal controlled Vedanta Resources. 

The unsecured loans were extended mainly as cash management activities for better return, as per company. Vedanta Resources faves combined $1.7 bn in debt maturities next year. Basis this, following were key points raised by Kyma Capital:

- Money is being loaned to a near insolvent parent. This has been confirmed by both Vedanta Ltd. as well as Vedanta Resources auditors.

- Second, this is a related party transaction with a controlling shareholder which should naturally have a higher level of scrutiny. Instead the Vedanta Board seems to have been asleep at the wheel.

- It seems Vedanta was directly or indirectly funding it's own delisting.

- Both Cairn India Holding and Cairn Energy Hydrocarbons are very important subsidiary of Vedanta Ltd. However, auditor of both entities is an obscure accounting firm in Gurgaon with no statutory authorisation to audit UK companies.

- Money loaned from Cairn India Holdings to Vedanta appear to be in breach of RBI's FEMA.

- Disappointed with role of independent directors. We note resignation of Ms Lalita Gupta following raising of red flag by Kyma Capital.

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