In a significant regulatory intervention, the Securities and Exchange Board of India (Sebi) has found prima facie evidence suggesting that Rajesh Exports may have inflated its revenue by 97-99%. The interim order, issued on June 3, has barred the company's promoter, Rajesh Mehta, from trading in the company's securities and mandates full cooperation with ongoing investigations.
The investigation by Sebi, initiated after a shareholder complaint in March 2024, revealed substantial discrepancies in the company's financial statements. The complaint highlighted large outstanding trade receivables, prompting a formal investigation covering the period from April 2020 to March 2024. Sebi appointed BDO India Services as the forensic auditor to scrutinize the company's books.
Rajesh Exports, a prominent gold refiner and jewellery manufacturer based in Bengaluru, is listed on both the NSE and BSE. The company operates under the Shubh Jewellers brand and has significant international operations. However, Sebi's investigation has been hindered by the company's lack of cooperation, including restricted access to key accounting systems and incomplete financial documentation.
“The aberrations prima facie noted in the matter, where approximately 97% to 99% of the revenue of the company is inflated, are egregious and unheard of.”
Kamlesh Chandra Varshney, Whole-Time Member, Sebi
The forensic audit revealed that only a small fraction of sampled transactions could be substantiated with supporting documents. Concerns were also raised about the financial reporting of overseas subsidiaries, including entities in Singapore and Switzerland, such as REL Singapore and Global Gold Refineries AG.
Sebi's order highlights the severe limitations faced by the forensic auditor due to the unavailability of critical accounting records, which prevented independent verification of several reported figures. Additionally, the regulator alleged that funds were routed in a manner that obscured their origin and destination, raising doubts about the authenticity of the financial statements.
Given the gravity of these findings, Sebi has mandated Rajesh Exports to provide all pending information within 30 days and has ordered the appointment of a new forensic auditor for a more detailed review.
Background
The investigation into Rajesh Exports underscores the challenges faced by regulators in ensuring corporate transparency and accountability. The company's alleged financial misconduct could have significant implications for investor confidence and market integrity.
As Sebi continues its investigation, market participants will be closely monitoring Rajesh Exports' compliance with the regulator's directives. The outcome of the fresh forensic audit will be crucial in determining the future course of action and restoring investor trust.
