New Delhi: The Securities and Exchange Board of India (SEBI) has given a harsh slap on the wrist to jeweller party Rajesh Exports and its Chairman and Managing Director, Rajesh Mehta, for alleged financial irregularities in the company’s reported revenues of almost ₹15.15 lakh crore. Mehta and the company are barred from trading securities as their investigation continues.
The case has now drawn in quite a lot of attention due to the scale of the case. SEBI alleges that Rajesh Exports misrepresented its revenues in the FY2020-21 to FY2024-25. Regulator claims over 80% of company’s sales was unconfirmed, possibly included via suspicious overseas companies
The investigation started as part of a shareholder complaint in March 2024, according to a report. After receipt of a complaint, SEBI went through the company’s books and papers and raised issues with accuracy in reported revenues. In the case of the company’s consolidated revenues, the revenues as reported were purportedly much greater than what would be supported by documents and transactions, the regulator is alleging.
According to the interim findings, SEBI suspects the company could have booked false revenue by up to 97/99% during the period. It would be one of the greatest incidents of financial misrepresentation in the history of Indian companies. The regulator has also found that the company hasn’t been cooperative with the investigators and the forensic auditors.
Besides the potential revenues inflation, SEBI has also voiced concern over company finance movement. The regulator said that the company’s funds have been channeled into accounts associated with Rajesh Mehta, without proper authorization and disclosures. Some of its funds were used in allegedly personal trading activities in derivatives. In this regard, SEBI has assumed that these transactions could not have transgressed the corporate governance norms or disclosure norms of the companies.
In its interim order, the Commission has banned Rajesh Mehta from trading in the shares of Rajesh Exports and directed the company to fully cooperate during the probe. The regulator has asked other questions requiring them to conduct a more in-depth review of its books and financial records what it calls forensic audits.
The stock markets responded negatively to the news. After the news of SEBI’s order broke yesterday, shares of Rajesh Exports have come down 5% and touched the lower circuit limit. Investors seemed to be worried about how the allegations might affect the company’s operations and credibility in the future.
The repercussions have spilled over to other stakeholders as well. The share price for one of the most prominent insurance companies, Life Insurance Corporation of India (LIC) suffered as each investor had to ponder something between financing and abating the controversy, given its large stakeholder stake in this company, Rajesh Exports.
For long, Rajesh Exports has remained one of the leading gold jewellery export companies of India and is a well known name in gems and jewellery market. Serious doubts have been cast, however, regarding the company’s financial reporting and internal controls, as a result of the latest allegations.
A company statement issued earlier did not go into details of the allegations, and Rajesh Mehta has yet to make a public statement. The preliminary finding of the investigation by SEBI shall be subject to further review of evidence and records and may be revised at any time.
The case is a reminder to investors of the value of transparency, good corporate governance and fair financial reporting. The investigation by SEBI, which comes on top of the ongoing result manipulation case involving promoter of Prero Capital, will now be under the close radar of watchful market participants as SEBI’s inquiry turns into one of the biggest cases of accounting fraud in recent history.
