SEBI Issues Interim Order Against Rajesh Exports, Cites Manipulated Financial Statements

Market regulator SEBI has issued an interim ex-parte order against Rajesh Exports Ltd. (REL) and its Chairman and Managing Director Rajesh Mehta, alleging serious financial irregularities, including misreporting of revenues, fund-routing issues and lack of cooperation during investigation.

In its 109-page order, SEBI said that Rajesh Exports appeared to have overstated its consolidated revenues by showing transactions that were not properly supported by records. The regulator observed that the company reported extremely large revenues over the years, much of which came from overseas subsidiaries, especially Valcambi SA.

SEBI noted that around 97-99% of the company’s consolidated revenue was shown as coming from foreign subsidiaries. However, it found that Valcambi’s own audited accounts reflected much lower revenue figures compared to what was reported at the group level.

The regulator alleged that the company may have counted the total value of gold transactions as revenue instead of only booking actual income from refining or processing work. SEBI also said that proper documents such as invoices, customer details and accounting explanations were not adequately provided, raising concerns that the financial statements may have been misleading to investors.

“I prima facie find 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, demonstrated systemic failure of corporate governance, concealment of material information and deliberate circumvention of regulatory requirements,” Varshney (whole-time member) said in the order.

SEBI stated that the company’s books and financial statements for FY21 to FY25 were likely manipulated. The issues include showing fake or unverified transactions, wrongly combining financial data, making unexplained investments, not properly revealing dealings with related parties, and diverting money through companies linked to the promoters.

The regulator alleged that these actions led to financial statements that did not reflect the company’s true position. According to SEBI, the reported figures gave a misleading impression of the company’s operational size, balance sheet strength, and overall financial health.

Among its findings, SEBI alleged that REL showed very large consolidated revenues of about Rs 15.15 lakh crore. This amount was said to be nearly 99.8% of the total consolidated revenue reported during FY21–FY25. The order stated that “REL has prima facie misrepresented approximately Rs 15,15,385 crore i.e. representing 99.80% of its revenues which are attributed to subsidiaries during the period FY 2020-21 to FY 2024-25. The aforesaid conduct appears to have prima facie enabled REL to portray an inflated and misleading picture of its operational scale, consolidated financial position and financial health before invetors and the securities market”.

It was also alleged that REL misreported standalone revenues of Rs 12,557 crore during FY21-FY24. In addition, SEBI said that the company incorrectly recorded derivative transactions carried out by Rajesh Mehta in his personal capacity as company sales and purchases, amounting to Rs 11,487 crore and Rs 11,488 crore, respectively.

The regulator further alleged that exchange fluctuations of Rs 867 crore and Rs 716 crore were wrongly shown as revenue and purchases. It also stated that Rs 204 crore of interest income from mutual funds and fixed deposits was incorrectly booked as revenue from operations.

SEBI also found that Rajesh Exports Limited (REL) had made a false claim about investing in gold mines in Africa. The company had claimed that its “Other Non-Current Investments” were investments in African gold mines, but this could not be verified from the financial statements and records available during the course of investigation, SEBI said. The regulator further alleged that company’s funds were routed through the personal bank accounts of Rajesh Mehta and Siddharth Mehta, which were not disclosed as related party transactions and were made without requisite approval of the board of directors and audit committee.

In its interim order, SEBI said REL did not fully cooperate with the investigation. The company allegedly did not provide consolidated financial information and provided inconsistent and contradictory information relating to its standalone financial statements at different stages of the probe, which made the investigation difficult.

SEBI also observed that REL had published financial results and annual reports containing transactions that appeared to be unsupported and possibly non-genuine. As a result, the regulator concluded that the company failed to maintain accuracy, transparency, and completeness in its disclosures to stock exchanges and investors.

The matter has also been referred to the National Financial Reporting Authority (NFRA) for examination of the conduct of the company’s statutory auditors. The order stated, “Looking at the prima facie misconduct and dereliction of duties of on the part of the statutory auditors, a copy of this order shall be forwarded to National Financial Reporting Authority for appropriate actions, if any, against the Statutory Auditors of REL.”

SEBI has directed Rajesh Exports to fully cooperate with the investigation by providing all documents and explanations. The company has also been instructed to ensure fair disclosure of its financial statements and other information required under SEBI’s listing regulations.

SEBI has barred Rajesh Mehta from buying, selling, or dealing in securities of Rajesh Exports Limited until further orders. Apart from this, it has also ordered a fresh forensic audit of the company.