The Securities and Exchange Board of India (SEBI) has barred Rajesh Exports chairman and managing director Rajesh Mehta from the capital market, alleging large-scale financial misrepresentation, disclosure lapses and non-cooperation with an investigation into the company's financial statements.
Based on its preliminary findings, SEBI alleged that Rajesh Exports had misrepresented Rs 15.15 lakh crore of revenues attributable to subsidiaries during FY21-FY25, representing about 99.8% of such revenues. The regulator said the disclosures appeared to have presented an inflated and misleading picture of the group's operational scale and financial health to investors.
The market regulator's probe, covering the period from April 2020 to March 2024, was initiated after a shareholder complaint raised concerns over potential financial misrepresentation relating to large outstanding trade receivables. SEBI subsequently appointed an investigating authority and a forensic auditor, BDO India Services Pvt Ltd, to examine the company's accounts.
In its interim order, SEBI said Rajesh Exports, a Bengaluru-based jewellery manufacturer, failed to cooperate fully with investigators and the forensic auditor by not providing access to enterprise resource planning systems, books of accounts and key accounting records. The regulator noted that only a small fraction of sampled transactions could be supported with complete documentation, raising concerns about the authenticity of the company's disclosures.
A key finding of the order relates to the company's overseas subsidiaries, particularly Swiss-based entities that account for the overwhelming majority of its consolidated business. SEBI observed that between 97% and 99% of Rajesh Exports' consolidated revenue originated from subsidiaries and step-down subsidiaries, yet the company failed to furnish complete financial statements and transaction-level data relating to these entities.
The regulator alleged that the company systematically withheld subsidiary financial statements from public disclosure and failed to provide customer-wise sales data, vendor details, creditor and debtor information despite repeated summons. According to SEBI, such omissions created a severe information asymmetry for investors and hindered regulatory verification of the company's consolidated financial performance.
SEBI further questioned the revenue recognition practices adopted by the company in consolidating the accounts of its overseas subsidiaries. The order noted significant discrepancies between the audited standalone financial statements of Swiss subsidiary Valcambi SA and the much larger unaudited revenues reported at the group level. According to the regulator, the standalone revenues of Valcambi represented less than 0.5% of the consolidated revenues reported by the group, despite the company describing Valcambi as its principal operating entity.
The order also highlighted multiple inconsistencies in sales data submitted by the company at different stages of the investigation. SEBI said contradictory figures furnished in response to various queries raised serious concerns regarding the reliability and authenticity of information provided by the company and impeded the investigation process.
The regulator also flagged transactions worth over Rs 11,400 crore between Rajesh Exports and Affluence Shares and Stocks Pvt Ltd, which accounted for nearly two-thirds of the company's standalone sales and purchases during FY22-FY24. SEBI said these transactions showed negligible value addition and required further scrutiny.