Rajesh Exports scam: How Sebi uncovered a Rs 15 lakh crore financial 'mess'

Rajesh Exports was for years considered a giant in the field of gold refining and jewellery. Its revenues were reported to be staggering, placing it among India’s largest publicly listed firms.

But now the Bengaluru-based firm is under the scanner of the Securities and Exchange Board of India (Sebi). The market regulator has accused Rajesh Exports of misrepresenting revenues worth Rs 15.15 lakh crore from FY21 to FY25. Sebi has said these revenues comprise nearly 99.8 per cent of its total reported consolidated revenue.

The market regulator on Wednesday (June 3) has also passed an ex parte interim order against Rajesh Exports chairman and managing director Rajesh Mehta. But what do we know about the Rajesh Exports ‘scam’ row? What is Sebi saying? How is the firm responding?

Let’s take a closer look.

What do we know about Rajesh Exports?

First, let’s take a brief look at Rajesh Exports and Mehta, its chairman and MD.

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As per Economic Times, Mehta was born on June 20, 1964, in Bengaluru. He is one of the most widely known figures in India’s gold jewellery industry. Mehta, who attended St. Joseph's School in Bengaluru, decided to go into his father’s jewellery business rather than study further.

Mehta and his brother Prashant in the 1980s borrowed Rs 1,200 from their eldest brother to start a silver jewellery firm. The enterprise expanded into one of the biggest wholesale silver jewellery businesses in South India and spread into key markets such as Gujarat and Mumbai.

According to Moneycontrol, Rajesh Exports for years constructed a reputation as one of the world’s biggest gold refiners and jewellery exporters. According to Economic Times, the turning point came in 1995 when the company publicly listed after an IPO. After raising over Rs 100 crore, the company expanded its operations from refining to manufacturing and retailing. A 2015 acquisition of Swiss precious metals refinery Valcambi for $400 million (Rs 3,831.6 crore) in an all-cash deal further boosted its global profile.

What led to the current row?

According to Moneycontrol, it all began with a shareholder complaint to Sebi in March 2024. The complaint pointed to possible financial misrepresentation regarding large trade receivables that had remained outstanding for more than two years.

This led to the regulator examining the company’s filings from the period post-2020 in detail. Sebi appointed an investigator and even brought in forensic auditor BDO to go over Rajesh Exports’ financial statements.

According to NDTV, Sebi in its 109-page interim order released Wednesday claimed there were massive discrepancies in the company's financial reporting between FY21 and FY25.

The regulator said that Rajesh Exports claimed that almost all of the company's reported consolidated revenues during that period – between 97 and 99 per cent – came from overseas. It pointed to the Swiss firm Valcambi, saying that when auditors examined records of the subsidiary, they found that the revenue did not tally.

They said the revenue reported by Rajesh Exports was far above the revenue that could be verified from subsidiaries like Valcambi. The result was a total discrepancy of Rs 15.15 lakh crore across five years. The regulator said if this is proved, then it would be one of the largest alleged cases of revenue misrepresentation ever.

Sebi also passed an ex parte interim order against Rajesh Exports chairman and managing director Rajesh Mehta. News18

The regulator also pointed to transactions made by Mehta through Sebi-registered broker Affluence Shares and Stocks Pvt. Ltd. According to Moneycontrol, Mehta sold gold derivatives worth Rs 11,487 crore and purchased gold derivatives worth Rs 11,488 crore via Affluence.

However, as per NDTV, Affluence has denied that such transactions occurred. The firm reportedly told investigators that Rajesh Exports was never a client and that no such agreements existed.

Sebi has also accused the company of not fully cooperating with its inquiry. The market regulator said that Rajesh Exports did not provide several critical documents it requested. This included complete customer records, vendor details and financial statements of subsidiaries.

Sebi claimed this resulted in its investigators being hampered when trying to examine Rajesh Exports’ financial statements.

The market regulator also passed an ex parte interim order against Mehta. The directive disallows Mehta from dealing in securities markets. It also ordered the company to rectify the incorrect filings and cooperate with its investigation. It also directed auditors to provide the papers it has requested.

What is Rajesh Exports saying?

The company has dismissed Sebi’s allegations and insisted that its revenues are accurate. "The revenues declared by the company are correct and there is no overstating of revenues," Rajesh Exports said in a statement.

It also pointed out that the order is an interim one. "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 the required and relevant documents," it added.

Mehta, speaking to NDTV Profit, claimed that the Sebi investigators are confusing gross profit with revenue. He also claimed that the Rs 15.5 lakh crore figure that Sebi pointed to is actually revenue from over five years.

"SEBI has not seen the clarification correctly," Mehta was quoted as saying. "This trade is absolutely correct. It is spread over a period of four years with Affluence. We have shared information with SEBI about the same.”

"We have submitted every document with respect to Affluence to SEBI. No personal account was used for trading with Affluence. There is no question of misrepresentation. There is no purpose of overstating our revenue. We have explained everything to SEBI, without any doubt," Mehta added.

"The standalone revenue is already included in the consolidated figure," he said. "Maybe they have not checked because of the bulkiness of the documents. We have sent 400 GB of documents.”

"It is an interim order and nothing in it is true," Mehta told Moneycontrol. "We are in the process of studying it and will prepare a response."

Shares of Rajesh Exports on Thursday hit the 5 per cent lower circuit.

However, that hasn’t calmed the nerves of investors. Shares of the firm on Thursday hit the 5 per cent lower circuit. This comes after the shares have lost 80 per cent of their value over the past few years.

Experts say the situation can be instructive for those interested in the stock market. Siddharth Maurya, Founder and Managing Director of Vibhavangal Anukulakara Private Limited, told NDTV, "Rajesh Exports offers a lesson on the shortfall of certain metrics. Although revenue, brand, and stock data are important and should be included in investment decisions, they should never be the sole components. Allegations of massive revenue fraud, coupled with the SEBI's regulatory action, and insolvency issues, necessitate a broader analysis of governance, liquidity, the quality of cash, auditor comments, and the level of transparency. Regulatory actions of this nature, and the subsequent erosion of trust, concern the integrity of the reported financials and the company's governance."

FAQs

1. What is Sebi accusing Rajesh Exports of?

Sebi has alleged that Rajesh Exports may have misrepresented around Rs 15.15 lakh crore in revenues between FY21 and FY25, which could account for nearly all its reported sales during that period.

2. Why is the Rs 15 lakh crore figure significant?

The amount is extremely large and, if proven, could make this one of the biggest alleged cases of revenue misreporting in India’s corporate history.

3. What is the company’s response to the allegations?

Rajesh Exports and its chairman Rajesh Mehta have denied all allegations, stating that their revenues are accurate and that there is a misunderstanding by Sebi, with supporting documents already submitted.

With inputs from agencies