Vedanta clarifies as $750 mn bond plan sparks mystery over $600 mn loan proceeds

On Monday, when ratings agency Moody's disclosed that Vedanta Resources Ltd (VRL) is looking to raise $750 million through unsecured dollar bonds to refinance a $550 million loan, short-seller Viceroy Research had a pointed question.

What happened to the proceeds of a $600 million loan that the holding company of the Vedanta Group had raised in June? That loan too, after all, was availed to refinance the same $550 million private credit facility, which carries an eye-watering interest rate of 18%, the New York-based short-seller said.

“It appears these funds have been spent on other uses,” the short-seller wrote in a note on Monday.

A spokesperson for Vedanta then clarified that the loan secured in June was only $500 million, and not $600 million. Further, $250 million from this was used for servicing other debt, the spokesperson said without elaborating. The rest $250 million remained undrawn, the spokesperson said.

The spokesperson, however, did not explain why the company was raising $750 million in bonds to refinance a $550 million when it already has $250 million in undrawn credit.

The confusion arose because Vedanta Resources had said in an earnings call in June that it had secured a $600 million term-loan facility. This capital was to be utilized to refinance the $550 million private credit facility, which was due in April 2026, it had said.

The transaction was to be completed after August, when the make-whole period for the loan ended. A make-whole provision is an obligation for a borrower to reimburse the lender for the lost interest when prepaying a loan.

For the upcoming $750 million bond issue, Moody’s has assigned a B2 rating. Moody's B2 rating is five notches below India's sovereign rating of Baa3 and falls in the highly speculative category.

"The refinancing of higher cost debt coupled with a more favorable interest rate environment should improve VRL's interest coverage ratio as measured by adjusted Ebit/interest expense to about 2.5x by fiscal 2027, from 1.9x for fiscal 2025," said Nidhi Dhruv, a Moody's Ratings vice-president and senior credit officer, and lead analyst for Vedanta Resources.

Impending ED Investigation: Fact or Fiction?

Viceroy Research, which has a short position of an undisclosed size on Vedanta Resources’ outstanding bonds, has for the past three months been issuing scathing reports on the mining and metals major. The short-seller has accused the group of committing numerous counts of fraud.

Vedanta has denied all allegations. The shares of Vedanta Ltd and Hindustan Zinc Ltd, the two Mumbai-listed firms of the group, have remained unaffected by the allegations.

On Monday, Viceroy claimed that after its numerous reports on the Vedanta Group, which it had shared with Indian authorities including the Reserve Bank of India (RBI), the central bank on 23 September asked it to share its findings with the Enforcement Directorate (ED), India's financial crime-fighting agency.

“At the RBI’s request, on September 25, 2025, Viceroy Research submitted detailed evidence to the ED, shared our correspondence with the Singapore Police Force (SPF) and offered additional support relating to confidential whistleblower testimonies,” the New York-based firm said Monday.

Vedanta Group has dismissed these allegations as baseless.

“We confirm that we have not received any communication from RBI, ED or Singaporean Authorities referenced in their dubious ‘report’. The report is clearly motivated, timed with the launch of our potential Bond transaction and lacks substance or merit,” the Vedanta spokesperson said in an email.

Shares of Vedanta Ltd settled 0.95% higher on the BSE on Monday at ₹452.15 apiece, compared to a marginal dip in benchmark Sensex. Stock of Hindustan Zinc gained about 4% to close at ₹466.55.