The National Financial Reporting Authority (NFRA) has confirmed the launch of its investigation into Rajesh Exports Ltd., a leading jewellery exporter. This probe comes nearly a month after the Securities and Exchange Board of India (Sebi) issued an interim order against the company, alleging large-scale revenue misrepresentation and fund diversion.
NFRA Confirms Investigation
NFRA Chairman Nitin Gupta confirmed that the audit regulatory body has commenced its review of the matter, stating, "We have started our process." He made these remarks on the sidelines of a FICCI conference focused on governance. Gupta, however, did not provide a timeline for the investigation or share any preliminary observations.
Sebi's Allegations Against Rajesh Exports
Sebi's interim order detailed serious accusations against Rajesh Exports. The market regulator alleged that the company misreported approximately Rs 15.15 lakh crore in revenue over a five-year period. This amount, according to Sebi, constitutes nearly the entire reported revenue of the company during that timeframe.
Furthermore, Sebi claimed that Rajesh Exports diverted company funds without obtaining the necessary approvals from its board or making the required public disclosures. A significant portion of the company's consolidated revenue, estimated at 97-99%, was reportedly generated by its overseas subsidiaries, particularly Switzerland-based Valcambi SA. Sebi also highlighted the company's failure to consistently disclose the financial statements of these subsidiaries in the public domain.
Company's Response and Market Impact
In response to Sebi's findings, Rajesh Exports attributed the issues to a "confusion and communication gap," indicating that it is actively working to address the concerns raised by the regulator.
As part of its interim order, Sebi barred Rajesh Exports and its promoter, Rajesh Mehta, from accessing the securities market until its investigation is complete. The news of the NFRA probe led to a decline in Rajesh Exports' shares, which were down 3.32% on Wednesday. On a year-to-date basis, the company's shares have plunged by 47.25%.