Vedanta Rebated ₹1,030 Crore Brand Fee After Facing ED Scrutiny: Viceroy Report

Vedanta Under ED Scanner: Investigative financial research firm Viceroy Research on Wednesday, July 30, alleged that Vedanta Resources (VRL) agreed to rebate Rs 1,030 crore to Vedanta Limited (VEDL) to avoid immediate enforcement action after having faced scrutiny from Enforcement Directorate in 2023.

In July 2023, the nforcement Directorate (ED) had summoned Vedanta Limited’s CEO and CFO regarding improper brand fee payments to its parent firm, Vedanta Resources Limited.

The ED is rightfully the most feared of India’s financial investigators and, according to the colorful language of one observer, the “Leadership s**t their pants”, according to a Viceroy Research report.

“Since our first report on Vedanta Resources (VRL), dozens of whistleblowers including former employees, advisors, and counterparties have come forward, corroborating and expanding on the mechanisms used to extract value from Vedanta Limited (VEDL),” the research entity mentioned. 

In July 2023, India’s Enforcement Directorate (ED) summoned Vedanta Limited’s CEO and CFO regarding improper brand fee payments to its parent, Vedanta Resources Limited. The ED is rightfully the most feared of India’s financial investigators and, according to the colorful language of one observer, the “Leadership s**t their pants”.

Sonal Shrivastava attended the AGM, the ED interview, and then promptly resigned in October 2023, only 5 months after joining.

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CEO Sunil Duggal refused to even appear, leaving the newly-appointed CFO, Sonal Shrivastava, to attend the interview with Ajay Agarwal, a non-board member of the executive committee.

Brand fees were supposed to be solely paid at the start of the financial year, but this was not the case. Whenever VRL faced a liquidity crunch it triggered ad hoc remittances from VEDL under the banner of brand fees. These ad hoc payments were what originally drew the attention of the ED.

Since then, VRL has instituted year-end “refunds” of brand fee overpayments to its subsidiaries, quietly acknowledging the fee structure’s non-compliance. These facts have not been disclosed to bondholders or the market.