Vedanta breaks silence on ED search; here's what the company said about penalties and operations

Vedanta Share Price: Vedanta Ltd on Thursday said a search operation conducted by the Directorate of Enforcement (ED) under the Foreign Exchange Management Act (FEMA), 1999, has concluded without any penalty, restriction or sanction being imposed on the company.

The clarification came through a regulatory filing to stock exchanges after the mining and metals major underwent searches at its premises between June 1 and June 3.

According to the company, the search operation commenced at 12:15 pm on June 1 and concluded at 9:55 pm on June 3. The action was undertaken by the Enforcement Directorate as part of an investigation under FEMA.

Company says it fully cooperated

In its exchange filing, Vedanta said its officers extended full cooperation to the investigating agency throughout the course of the search operation.

The company stated that it provided all information, documents and clarifications sought by the authorities during the exercise.

Vedanta further clarified that no adverse action has been taken against the company following the completion of the search.

"There is no penalty, restriction, or sanction imposed on the company pursuant to the search operation," the company said.

No impact on operations or finances

Seeking to reassure investors, Vedanta said the regulatory action has not affected any aspect of its business.

The company stated that there is no impact on its financial position, operational performance or any other activities arising from the search.

The clarification is likely to ease concerns that had emerged in the market following reports that the ED was examining certain transactions linked to royalty payments made by Vedanta Ltd to its parent company, Vedanta Resources.

Earlier, a spokesperson for the Vedanta Group had said the company was extending full cooperation to authorities and was providing all information sought during the course of the investigation.

Shares end lower

Vedanta shares remained under pressure on Thursday despite the company's statement.

The stock settled at Rs 327.50 on the NSE, down 0.21 per cent from the previous close.

The counter has witnessed heightened volatility over the last few sessions after reports of the ED searches surfaced. Earlier this week, the stock had fallen sharply from its intraday high as investors assessed the possible implications of the regulatory action.

Demerger plans remain in focus

With the company now confirming that the search has concluded without any penalty or operational impact, investor attention is expected to shift back to Vedanta's ongoing demerger plans.

The Anil Agarwal-led group is in the process of splitting its businesses into separate listed entities covering aluminium, oil and gas, power, iron ore and other segments.

Last month, Vedanta Group Chairman Anil Agarwal had indicated that the demerged businesses are expected to begin trading independently by the end of June.

Recent credit rating upgrade

The clarification also comes shortly after a positive development on the credit front.

Last week, rating agency ICRA upgraded the long-term ratings of key Vedanta group entities to AA+, the highest domestic credit rating received by the group in more than a decade.

Securities carrying an AA+ rating are considered to have very low credit risk, reflecting stronger financial metrics and improved credit quality.

Strong long-term returns

Despite the recent correction, Vedanta remains one of the better-performing large-cap metal stocks over the longer term.

The stock has gained more than 21 per cent over the past month, nearly 65 per cent in the last six months and over 102 per cent during the past year. Over a five-year period, shares of the company have surged more than 216 per cent.