SEBI Bars Rajesh Exports' Promoter Amid Revenue Misrepresentation Claims

The Securities and Exchange Board of India (SEBI) has imposed a ban on Rajesh Exports chairman and managing director Rajesh Mehta from participating in the capital market. This action follows allegations of extensive financial misrepresentation, lapses in disclosure, and inadequate cooperation with an ongoing investigation into the company's financial statements. SEBI's preliminary findings suggest that Rajesh Exports inflated revenues of ₹15.15 lakh crore (approximately $182 billion) attributable to subsidiaries during the fiscal years 2021 to 2025, representing about 99.8% of the company's reported revenues. The regulator's investigation was prompted by a complaint from a shareholder that raised concerns over potential misrepresentation of financial data, specifically regarding substantial outstanding trade receivables. Consequently, SEBI appointed a forensic auditor, BDO India Services Pvt Ltd, to scrutinise the company’s financial records. According to SEBI's interim order, Rajesh Exports, based in Bengaluru and a significant player in the jewellery manufacturing sector, reportedly failed to provide full access to essential documentation, including enterprise resource planning systems, financial books, and key accounting records. The watchdog noted that only a limited number of transactions could be sufficiently validated through complete documentation, which raises serious doubts regarding the integrity of the company's disclosures.

A crucial aspect of SEBI's findings pertains to the company's international subsidiaries, particularly those based in Switzerland, which account for the vast majority of its consolidated revenue. The investigation revealed that between 97% and 99% of Rajesh Exports' total consolidated income was derived from these subsidiaries and their branches. However, the company allegedly did not present comprehensive financial statements nor transaction-level data for these entities, despite multiple requests from the regulator. SEBI asserted that this lack of transparency has significantly hindered investors' understanding of the company's financial health.

The regulator also scrutinised Rajesh Exports' revenue recognition practices regarding these international subsidiaries. It highlighted significant discrepancies between the audited standalone financial statements of its Swiss subsidiary, Valcambi SA, and the larger unaudited revenues it reported at the group level. Although Valcambi is described as the primary operating entity, its standalone revenues accounted for less than 0.5% of the group’s reported total revenues.

Furthermore, the order pointed out various inconsistencies in the sales data submitted by the company during the investigation. SEBI reported that conflicting figures had been provided for several inquiries, raising considerable doubt about the reliability and authenticity of the information given, ultimately obstructing the investigation. Among other concerns, transactions valued at over ₹11,400 crore (approximately $1.4 billion) between Rajesh Exports and Affluence Shares and Stocks Pvt Ltd were flagged, as they comprised nearly two-thirds of the company's standalone sales and purchases during the fiscal years 2022 to 2024. SEBI indicated that these transactions exhibited minimal value addition and warranted further examination.