Sebi interim order alleges revenue inflation at Rajesh Exports; promoter restrained

The Enforcement Directorate on Tuesday conducted searches against Rajesh Exports which is facing scrutiny from market regulator Sebi over alleged financial irregularities, official sources said. The action is understood to have been taken under the Foreign Exchange Management Act (FEMA) at the Bengaluru-headquartered company. Premises in Bengaluru and Mumbai linked to the company are being covered, they said.Also read: Inside Sebi's Rs 15.15 lakh crore revenue inflation allegations against Rajesh Exports Rajesh Exports Ltd allegedly inflated its consolidated revenues by more than Rs 15 lakh crore over five years by attributing massive revenues to overseas subsidiaries, particularly Switzerland-based Valcambi SA, despite the subsidiary's audited standalone financial statements showing only a fraction of those amounts, according to an interim order by Sebi. The regulator has restrained the company's Chairman and Managing Director, Rajesh Mehta, from buying, selling or dealing in securities of Rajesh Exports, either directly or indirectly, until further orders. Rajesh Exports has denied any financial irregularities, saying its reported revenues were correct and that there seemed to be a communication gap between the markets regulator and the firm.

Shares of Rajesh Exports extended their sharp recovery on Friday, hitting the 5% upper circuit at Rs 97.51. With this move, the stock has gained nearly 28% over the past five trading sessions, signalling a strong rebound after its recent steep decline.The recovery comes after a sharp selloff that pushed the stock to a 52-week low of Rs 77.05 last week. The decline followed a seven-session losing streak triggered by an interim order issued by the Securities and Exchange Board of India (SEBI) on June 3.In its order, SEBI barred Rajesh Exports and its founder-chairman Rajesh Mehta from accessing the securities market pending further investigation. The regulator also alleged that the company had overstated its revenue by approximately Rs 15.15 lakh crore during the financial years FY21 to FY25.SEBI further raised concerns about the financial reporting of the company’s overseas subsidiaries, particularly Switzerland-based Valcambi SA. According to the regulator, a large portion of Rajesh Exports’ consolidated revenue—between 97% and 99% during the review period—came from its international subsidiaries, and some of this reporting was allegedly misrepresented.Rajesh Exports: SEBI Has All The Powers But Where Is The Accountability? Despite the allegations, Rajesh Exports has strongly rejected any wrongdoing. In a detailed clarification issued after the SEBI order, the company stated that the findings were preliminary in nature and not conclusive. It reiterated that its financial statements and revenue disclosures are accurate and properly reported.The company also said it is actively responding to SEBI’s concerns with appropriate documentation and explanations. Stock Of Rajesh Exports Hits 5% Upper Circuit After Sharp Sebi-Linked Selloff Additionally, it clarified discrepancies in reported financial figures across exchange filings, stating that these differences arise from distinct reporting parameters such as voting-eligible shares, actual votes cast, and paid-up share capital classifications. According to the company, these variations do not indicate any irregularity.Despite regulatory overhang, investor sentiment has improved in the short term, driving a strong technical rebound in the stock after the recent sharp correction.

The shares of Rajesh Exports took a breather after an incessant fall, rising 5% to hit the upper circuit on Monday after Sebi’s interim order over alleged Rs 15.15 lakh crore revenue inflation sparked a 30% crash in the stock over seven consecutive sessions.The shares of the company jumped to Rs 80.23 apiece on the NSE amid the overall market uptrend. The stock has overall tumbled 55% in 2026 so far and 87% in three years, with its market capitalisation coming down to Rs 2,369 crore.Sebi’s interim order against Rajesh ExportsSebi, in its interim order released earlier this month, claimed that its investigation and forensic review had uncovered prima facie evidence suggesting that about 97-99% of the company's revenue may have been inflated, describing the findings as "egregious and unheard of."The market regulator restrained promoter Rajesh Mehta from buying, selling or dealing in securities of Rajesh Exports until further orders, and also directed the company to cooperate fully with investigators. This came after a shareholder complaint received in March 2024.Also read: Canara Bank recovers over half of ₹500 crore Rajesh Exports exposure, CEO outlines growth strategyRajesh Exports blames ‘communication gap and confusion’Rajesh Exports, in an exchange filing, clarified that the order is interim and no adverse conclusion has been made by Sebi yet. It said that the revenues declared by the company are correct, and no overstating of earnings has been done. “There seems to be some type of communication gap and confusion between Sebi and the company,” Rajesh Exports said.The company further said that it is confident that Sebi, in its wisdom, will clarify the situation and arrive at the correct conclusion, based on the authenticated documents which are in the process of submission by the company.“The core observation in the order is concerning the misreporting of the revenues. This has emerged primarily due to confusion because SEBI has considered the Ebitda of Valcambi instead of Revenue; hence, it has stated that there is a difference of about 97% in the revenue. The consolidated Revenue as stated by the Company is correct,” Rajesh Exports said in another exchange filing.Also read: Rajesh Exports is not alone; there are many hiding behind one word called …Promoter Rajesh Mehta denies allegationsIn an interview with PTI, the company’s founder and chairman, Rajesh Mehta, denied allegations that Rajesh Exports had impeded the audit process and said the company had been forthcoming with investigators throughout."I would never agree to the fact that certain relevant documents have not been submitted by us. We have submitted everything we were asked for. Sebi has not found anything; maybe we have missed out on something. All that will be reconciled now," Mehta said.On whether the company plans to legally contest Sebi's directions, Mehta said there was no reason to do so. "Sebi has all the authority and right to keep asking us for documents for any number of years. There is no fine, no penalty, no coercive action in this order. Why should we challenge it?" he said.Also read: Why is the stock market rising today?(With inputs from agencies)(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times.)

Shares of Rajesh Exports Ltd staged a sharp recovery in morning trade on Monday, hitting the 5% upper circuit at Rs 80.23, after enduring a seven-session losing streak that wiped out nearly 30% of its market value. The rebound came after a steep selloff that pushed the stock to a 52-week low of Rs 77.05 on Friday.The decline was triggered by an interim order from the Securities and Exchange Board of India (Sebi), which barred Rajesh Exports and its founder-chairman Rajesh Mehta from accessing the securities market pending further investigation.In its June 3 interim order, Sebi alleged that the company had overstated its revenue by approximately Rs 15.15 lakh crore between FY21 and FY25. The regulator also raised concerns over financial disclosures related to the company’s overseas subsidiaries, stating that nearly 97–99% of Rajesh Exports’ consolidated revenue was generated through entities abroad, particularly Switzerland-based Valcambi SA.Following the order, the stock witnessed heavy selling pressure, extending losses for seven consecutive trading sessions.Rajesh Exports Under SEBI Scanner, ₹15.15 Lakh Crore Revenue Records Questioned As Market Value Drops Below ₹2,800 CroreRajesh Exports Stock Hits Lower Circuit For Third Straight Session In response, Rajesh Exports issued a detailed clarification rejecting all allegations of wrongdoing. The company said its reported revenues and financial statements are accurate and in compliance with regulations. It further stated that the Sebi order is only interim in nature and based on preliminary observations, and that it is actively working to address the concerns raised with supporting documents and explanations.The company also pointed out that variations in reported figures across disclosures do not indicate inconsistencies, as they correspond to different reporting parameters such as voting-eligible shares, votes cast, and paid-up capital classifications.Despite Monday’s recovery, the stock continues to trade significantly below pre-order levels, reflecting ongoing investor caution amid regulatory scrutiny and uncertainty over the final outcome of the Sebi investigation.

Shares of Rajesh Exports (REL) tumbled 5% to hit the lower circuit at Rs 94.50 on Monday, marking the third consecutive session of sharp losses after market regulator Sebi accused the company of orchestrating an elaborate financial fraud involving alleged revenue inflation of Rs 15.15 lakh crore over the years, personal gold trades purportedly passed off as corporate sales, and investments of Rs 1,035 crore in gold mines.In its findings, Sebi alleged accounting irregularities, diversion of company funds into personal accounts, and a pattern of conduct aimed at misleading investors. The regulator also flagged lapses by the company's auditors and said both Rajesh Exports and its auditors failed to fully cooperate with the investigation.In its 109-page interim order dated June 3, Sebi said its investigation and forensic examination revealed prima facie evidence suggesting that nearly 97-99% of the company's reported revenue may have been inflated. The regulator described the alleged discrepancies as "egregious and unheard of".Pending further directions, Sebi has barred Rajesh Mehta from buying, selling or otherwise dealing in securities of Rajesh Exports. The regulator has also directed the company to fully cooperate with investigators and ensure true and fair disclosure of its financial statements and related-party transactions."The acts of REL constitute a deliberate device, scheme and artifice to mislead and defraud investors dealing in the shares of REL by portraying an inflated and misleading picture of its operational scale, revenue and financial health," Sebi said in its order.The case stems from a shareholder complaint received in March 2024 that raised concerns over substantial trade receivables reflected in the company's accounts. Following a preliminary review, Sebi initiated a detailed investigation covering the period from April 2020 to March 2024 and appointed BDO India Services as the forensic auditor.Besides restricting Rajesh Mehta from dealing in the company's securities, Sebi has directed Rajesh Exports to furnish all pending information sought by investigators within 30 days. The regulator has also ordered the appointment of a new forensic auditor to conduct a more comprehensive review of the company's books and transactions.Rajesh Exports has denied the allegations. In a press release issued on Thursday, the company said the revenues reported in its financial statements were accurate and contended that Sebi's conclusions were based on a misunderstanding between revenue and EBITDA figures at Swiss refiner Valcambi SA, an indirect subsidiary of the company.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

Mumbai: It is India's fourth biggest company by revenue, but the managing director of precious metals trader Rajesh Exports (REL) apparently doesn't know how and from where it gets the biggest chunk of the revenue, show the findings of a regulatory investigation.In its investigation report, the Securities and Exchange Board of India observed allegedly unscrupulous activities by REL's promoters, such as accounting irregularities and siphoning off of company funds into personal accounts, and also pointed out lapses by its auditors. The regulator said the company and its auditors were non-cooperative."The acts of REL constitute a deliberate device, scheme and artifice to mislead and defraud investors dealing in the shares of REL by portraying an inflated and misleading picture of its operational scale, revenue and financial health," Sebi observed in its report.The company, eponymously named after its chairman Rajesh Mehta, is accused of committing an elaborate financial fraud that includes dressing-up of revenues of ₹15.15 lakh crore over the years, personal gold trades covered up as corporate sales and phoney gold mine investments of ₹1,035 crore, according to the interim report.REL denied the charges of misdeeds. In a press release Thursday, the company said the revenues stated in its financials were correct and that the confusion arose because of a mix-up between Ebitda and revenue numbers at Swiss refiner Valcambi SA, an indirect subsidiary.Sebi has not made any adverse observation with regard to earnings, the company said, claiming that the regulator has only observed suspicion with regard to revenues which was primarily because of confusion over the Valcambi numbers.Numbers don't add upIn fiscal 2025, REL reported consolidated revenue of ₹4.23 lakh crore against a profit after tax of just ₹95 crore, translating into a net margin of barely 0.02%. The year before, on ₹2.8 lakh crore revenue, profit was ₹336 crore.Experts who have studied the Sebi report and the company's annual reports say the numbers did not add up. The business appeared to be operating at margins that were not merely thin but structurally negligible, they said."It looks like a case of pass-through accounting. There is no value creation. It was 'flow of gold' being booked as revenue," said a leading auditor on the condition of anonymity.Sebi, which began the investigations in March 2024 following a shareholder complaint about suspected accounting malpractices, said it found that about 97-99% of REL's consolidated revenues were attributed to its overseas subsidiaries, principally Valcambi. But Valcambi's own accounts, audited by KPMG SA, recorded only processing fees that were about ₹3,027 crore across five years.Valcambi refined gold on behalf of clients and never took ownership of the precious metal or recognised the value of gold as revenue in its books. Yet, Global Gold Refineries AG (GGR), the parent of Valcambi that had no independent operating business, recorded gross revenues running into hundreds of crores by including the gross value of gold that actually belonged to others, according to the Sebi report.Rajesh Exports, which owns GGR through a Singapore subsidiary, used those unaudited figures in its financial statements, significantly bumping up the company's revenue, it said.In its press release, REL said: "The core observation in the order is with regard to the misreporting of the revenues. This has emerged primarily due to confusion because Sebi has considered the Ebitda of Valcambi instead of revenue hence it has stated that there is a difference of about 97% in the revenue.""There is no reason for any listed entity to inflate revenue and maintain the earnings, this will only reduce the margins of the company, which would be adverse to the company," it said.Senior management in the darkThe senior management of REL told regulators that most of them were in the dark about the company's overseas operations and only the promoter, Rajesh Mehta, dealt with those activities."Valcambi SA does not have any gold mine on its own," managing director Suresh Gowda was quoted in the Sebi order as saying. "It refines the raw gold purchased by it from various entities, whose names I do not recollect, as these things are exclusively handled by Rajesh Mehta, chairman of REL. I have never interacted nor involved with any subsidiary/step-down subsidiary of REL, as these were exclusively taken care of by Rajesh Mehta," he told the investigators, as per the order.According to the report, REL booked ₹11,487 crore in sales between 2021-22 and 2023-24 to Affluence Shares and Stocks, a broker that made up to 66% of the company's standalone revenue for that period. But Affluence, in formal depositions to the regulator, said it had not done any business with REL.Following the transaction trail, the investigators found out that the transactions were personal gold derivative trades executed by promoter Mehta using his own brokerage account and then recorded in the company's books as corporate sales, the order said.The investigators also found that Mehta used corporate funds. As per the Sebi observations, bank records show REL transferred ₹338.90 crore directly into Mehta's personal accounts between April 2020 and September 2025.Unlike in the case of Nirav Modi or Gitanjali Gems, who are accused of bank fraud, Rajesh Exports doesn't appear to have borrowed big from banks or through sale of bonds, according to regulatory filings.The company's market cap was just over ₹3,000 crore, as per Thursday's closing share price. LIC (10.8%) and Bridge India Fund (8.46%) are its major institutional shareholders."It is striking that, even at a peak market capitalisation of ₹25,000 crore, the company did not hold any analyst calls, a basic expectation for a listed company of that scale," said Shriram Subramanian, founder and managing director of InGovern Research Services, a corporate governance advisory firm.The regulator in 2024 hired BDO India Services to investigate. But the forensic audit faced problems at almost every stage of the investigation. It was denied access to ERP systems and was not provided a complete journal dump, preventing independent verification of transactions recorded in the books, according to the regulatory report.And the company declined to share subsidiary-level records with the investigator, citing Swiss data protection laws, limiting auditors largely to reviewing financial statements prepared by the management itself rather than underlying evidence, it said.What's also come under the scanner was the conduct of statutory auditors for the last few years: CA PV Ramana Reddy, the proprietor at PV Ramana Reddy & Co, and CA PL Venkatadri, partner at BSD & Co.The company's FY24 and FY25 annual reports, filed with the stock exchanges, carry an unqualified opinion from BSD & Co, which concluded that the financial statements presented a "true and fair view" in line with Indian Accounting Standards.The company's FY24 Directors' Report noted that the statutory and secretarial auditors had made no qualifications, reservations or adverse remarks.The Sebi report said for over five months, the auditors sat on the regulator's request for missing documents and statements.Emails sent to both audit firms did not elicit any response.REL closed 5% lower at ₹103.92 Thursday on the NSE. The shares are down from their peak of ₹1,028.40 on February 6, 2023.