Tale of the Tape 

Howdy folks!

Nifty and Sensex were stuck in a sideways trend before closing slightly lower. Midcaps (-0.1%) and Smallcaps (-0.6%) traded mixed. The advance-decline ratio was split evenly.

It was an equal mix of red and green for sectors. FMCG (+0.8%) and Auto (+0.4%) were the top gainers. Meanwhile,  Real Estate (-1.5%), Metals (-1.4%) and Oil & Gas (-1.2%) witnessed the most selling pressure.

US short-seller Viceroy has Vedanta (-3%) in its crosshairs. Read our top story to get all the deets.

Looking for short-term stock picks? We’ve got you covered. Check out Investec’s top quarterly alpha bets below.

Syrma SGS, 5Paisa and India Shelter Finance saw big moves. Look at their charts below to find out why.

RIL was down -1% after reports said it will delay its Jio IPO to next year.

Phoenix Mills (-3%) fell after Nomura flagged valuation concerns + slowing growth. The brokerage, which initiated coverage, sees  a further -8% downside.

Union Bank of India cracked -4% after reporting its weakest loan growth in one year in its Q1 update.

Crizac had a great market debut. The stock ended at Rs 306 p/sh; +25% higher than its IPO price.

Stock
Vedanta Is The New Adani?

Vedanta cracked -6% intraday after US-based short seller Viceroy Research raised serious concerns about the financial health and corporate governance of the conglomerate. To be precise, they called Anil Agarwal’s empire “financially unsustainable”, “operationally compromised” and closely “resembles a Ponzi scheme”. Those are rough words, so let’s dive into their allegations.

The basic thesis here is that Vedanta’s promoters are sucking dry their massive empire. Individual group companies are only propped up by new debt, accounting tricks and deferring undisclosed liabilities! There are also specific allegations of inflated asset values & profits and disputed expenses kept off balance sheets. 

Consider just one example: ESL Steel, a Vedanta subsidiary. The company said in 2022 that it invested $133 million to expand. Viceroy claims nearly 30% of that money actually went to acquiring land that were meant as compensation for the firm’s environmental violations. But the company treated it as an asset. And oh, all the other capex went more into maintenance instead of actual useful assets like plant infra or equipment. This, Viceroy says, is just a hint of what’s wrong at Vedanta.

Big Picture: Viceroy has a long list of complaints, a lot of which are in the public domain already. But there are several accounting issues which the company should come clear on. FYI - Vedanta has already dismissed the report, calling it full of “baseless allegations”.

Finally, everyone knows Agarwal has been milking Vedanta dry through dividends. This isn’t new; they have a debt problem and companies like Hindustan Zinc are the golden goose. For long-time Vedanta investors, experts say wait out the storm. We’ve seen Adani beat off Hindenburg. But it will require Vedanta to be transparent and address each claim with honesty.