The Securities and Exchange Board of India has ordered a fresh forensic audit of Rajesh Exports after the earlier audit could not be completed satisfactorily, as reported by The Economic Times. This represents a significant escalation in the regulatory action against the gold jewellery manufacturer. The regulator has also restrained promoter and Executive Chairman Rajesh Mehta from buying, selling or dealing in Rajesh Exports shares until further orders. Additionally, Sebi has forwarded the order to the National Financial Reporting Authority (NFRA) for examination of the conduct of the company's statutory auditors, indicating the scope of the investigation has expanded beyond the company itself. In the latest 109-page interim order, Whole Time Member Kamlesh Chandra Varshney noted that the company 'engaged in a multi-year pattern of recording non-genuine transactions, adopting improper accounting treatments, routing corporate funds through personal accounts and promoter-linked entities, and failing to make adequate disclosures to investors'. The order specifically states that 'the pattern of routing substantial sums through the personal bank accounts of Mr. Rajesh Mehta and Siddharth Mehta, coupled with absence of approvals, non-disclosure and inconsistent explanations, demonstrates systemic failure of corporate governance, concealment of material information and deliberate circumvention of regulatory requirements'. SEBI has also directed Rajesh Exports and Mehta to cooperate with the investigation, submit documents and respond to queries within 30 days, as reported by CNBC TV18.
Rajesh Exports Chairman and Managing Director Rajesh Mehta has broken his silence on the Securities and Exchange Board of India's sweeping order against the company, telling Moneycontrol that the findings are inaccurate. According to reports from Moneycontrol, Mehta stated that 'It is an interim order and nothing in it is true' and indicated that the company would share a detailed response. This marks the first public comment from the company's leadership since SEBI's allegations became public. The latest developments show that Sebi has specifically named promoter and Executive Chairman Rajesh Mehta in the order, noting that he attended every board meeting and audit committee meeting during the relevant period, with statements recorded during the investigation suggesting key decisions were handled by him. The regulator has also restrained Rajesh Mehta from buying, selling, or dealing in Rajesh Exports Limited securities until further orders and directed the company to cooperate and provide documents as sought by the Investigating Authority. Rajesh Exports Limited has dismissed all allegations, stating that 'the revenues declared by the company are correct and there is no over stating of revenues' and that 'there seems to be some type of communication gap and confusion between SEBI and the company'. The company is in the process of clarifying all aspects to SEBI by submitting all required and relevant documents. According to CNBC TV18, the company has denied overstating revenue and said it will work with SEBI to clarify the issues raised.
The Securities and Exchange Board of India has alleged that Rajesh Exports misrepresented approximately ₹15.15 lakh crore in revenue between fiscal 2020-21 and 2024-25, as reported by NDTV Profit. The controversy began with a shareholder complaint received by SEBI on March 11, 2024, questioning unusually large trade receivables that had reportedly remained outstanding for more than two years. According to the latest order, the overwhelming majority (approx. 97-99%) of REL's consolidated revenues were attributed to overseas subsidiaries and yet the company 'failed to furnish verifiable records supporting such revenues despite repeated summons'. SEBI's investigation found that the most important subsidiary was Valcambi SA, a Switzerland-based gold refinery acquired by Rajesh Exports years ago, which is widely regarded as the operational backbone of the group's international business. However, when auditors examined records linked to Valcambi and other subsidiaries, they found a major mismatch where revenues reported at the consolidated group level were vastly higher than the revenues that could actually be verified from subsidiary records. The result was a cumulative discrepancy of ₹15.15 lakh crore across five years, representing almost the entirety of the company's reported consolidated revenues during the period under review. If ultimately proven, it would rank among the largest alleged cases of revenue misrepresentation ever seen in India's corporate sector.
The investigation has uncovered staggering financial irregularities, with Rajesh Exports recorded non-genuine sales transactions worth ₹11,486.60 crore and non-genuine purchase transactions worth ₹11,488.42 crore through an entity called Affluence. According to the order, these transactions accounted for 74% of reported revenue in FY22, 86% in FY23 and 36% in FY24 on a standalone basis. The regulator also examined transactions involving entities called Vienna Multiventures and Harshil Enterprise, where the company claimed purchases worth more than ₹59 crore but no purchase orders, delivery challans, gate entries, inventory records or material receipt notes supporting the transactions were found. The original shareholder complaint focused on trade receivables, with receivables worth ₹2,914 crore being reduced through offsetting arrangements involving trade payables that the company failed to demonstrate any legally enforceable right to carry out. SEBI has also alleged misrepresentation of standalone revenues amounting to ₹12,557 crore during FY21-FY24 and noted that the company falsely recorded derivative transactions executed by Rajesh Mehta in his personal capacity as company sales of ₹11,487 crore and purchases of ₹11,488 crore, classified exchange fluctuations of ₹867 crore and ₹716 crore as revenue and purchases respectively, and booked ₹204 crore of interest income from mutual funds and fixed deposits as revenue from operations. The regulator also questioned a reported investment worth ₹1,035 crore in gold mining assets located in Africa, stating that the company was unable to furnish adequate documentation supporting the existence and valuation of these investments. According to CNBC TV18, SEBI has accused Rajesh Exports of alleged financial misrepresentation, disclosure lapses, improper accounting practices and diversion of funds.
Sebi's investigation has revealed what it describes as 'a systematic and multi-year scheme of financial misrepresentation' rather than isolated incidents. The regulator found evidence suggesting routing and layering of corporate funds through personal accounts and related entities, with transactions routed through promoter Rajesh Mehta's personal account that the company failed to provide adequate documentation for. According to the order, the company submitted different sales figures to the regulator at different stages of the investigation, with contradictions raising serious concerns about the reliability and authenticity of information furnished. SEBI has specifically invoked provisions relating to fraudulent and unfair trade practices, alleging violations under multiple provisions including misleading investors through inflated financial statements, failure to disclose related-party transactions, and failure to comply with accounting standards. The regulator noted that 'REL has hampered SEBI's investigation by failing to provide consolidated-level information and furnishing varying and inconsistent submissions w.r.t. standalone-level information, at different stages of the investigation' and that 'by publishing such misrepresented financial results and annual financial statements containing prima facie non-genuine and unsupported transactions, REL failed to ensure accuracy, completeness and transparency in its disclosures to stock exchanges and investors'. SEBI also pointed to inconsistent submissions and a lack of cooperation during parts of the investigation, with the forensic auditor allegedly not receiving complete customer records, vendor details and financial statements of material subsidiaries. According to CNBC TV18, the probe began after a shareholder complaint, and SEBI has directed Rajesh Exports and Mehta to cooperate with the investigation, submit documents and respond to queries within 30 days.
The allegations have sent shockwaves through Dalal Street, with Rajesh Exports shares hitting the 5% lower circuit after the SEBI order became public. The stock has been under pressure for years, with over the past three years, the shares have lost more than 80% of their value and currently trading significantly below its historical peak. SEBI estimated that shareholder wealth erosion linked to the alleged misconduct could be as high as ₹12,726 crore. The controversy extends beyond the promoters to include millions of ordinary investors indirectly exposed to the company, with one of the biggest stakeholders being the state-owned Life Insurance Corporation of India (LIC), which owns around 10.8% of Rajesh Exports. The banking sector is also affected, with Canara Bank having classified its exposure to the company as a stressed asset after repayment defaults, with outstanding dues reported to be around ₹509 crore. The investigation has been particularly challenging due to incomplete documents and lack of cooperation from the company, with SEBI stating that 'the absence of crucial records made it difficult to establish the authenticity of several transactions and disclosures'. According to CNBC TV18, the IIAS executive said internal audit functions, audit committees and statutory auditors form the primary checks and balances within a company, and questioned how several issues highlighted by SEBI were not identified earlier. The regulator has stated that 'by publishing such misrepresented financial results and annual financial statements containing prima facie non-genuine and unsupported transactions, REL failed to ensure accuracy, completeness and transparency in its disclosures to stock exchanges and investors'.
