The Securities and Exchange Board of India (Sebi) has launched an investigation into jewellery manufacturer Rajesh Exports Ltd, issuing an interim order that bars the company and its founder, Rajesh Mehta, from accessing the securities market. The regulator alleges that the company misrepresented approximately Rs 15.15 lakh crore ($158 billion) in revenue over a five-year period and diverted company funds without proper approvals.
Allegations of Massive Revenue Misrepresentation
According to Sebi's interim order, between fiscal years 2021 and 2025, Rajesh Exports allegedly misrepresented 99.80 percent of the revenues generated by its overseas subsidiaries, primarily Switzerland-based Valcambi SA. While Valcambi SA was presented as the group's principal operating entity, its audited standalone financial statements reportedly showed negligible revenues.
Former Congress leader Sanjay Jha brought the allegations to public attention on social media, questioning if this could be "the biggest stock market scam ever," surpassing even past high-profile frauds like that involving Harshad Mehta. Jha highlighted that such a large misrepresentation reportedly went unnoticed for five years, raising concerns about regulatory oversight and the involvement of institutional investors like LIC.
Fund Diversion and Non-Genuine Transactions
Sebi's investigation further alleges that Rajesh Exports routed Rs 338.90 crore of company funds to accounts linked to Rajesh Mehta, including for his personal derivatives trading activities. These transactions reportedly lacked board or audit committee approvals and were not properly disclosed as related-party dealings.
The regulator also flagged suspicious transactions involving Affluence Shares and Stocks Pvt Ltd. Rajesh Exports reported sales and purchases worth over Rs 11,487 crore with Affluence, but Affluence reportedly denied conducting any such transactions. Sebi believes these were non-genuine accounting entries designed to inflate turnover without any underlying economic substance, linked to Mehta's personal trading.
Impact and Company's Response
Sebi concluded that the alleged misrepresentation of financial statements and diversion of funds led to a wealth erosion of Rs 12,725.53 crore for Rajesh Exports' shareholders, including retail investors. Following the interim order, shares of Rajesh Exports fell 5 percent, contributing to a 44.63 percent decline over the past six months.
In response to the interim order, Rajesh Exports stated that the order is interim and no adverse conclusion has been reached. The company asserted that its declared revenues are correct and denied any overstatement. It attributed the situation to a "communication gap and confusion" with Sebi and confirmed it is in the process of submitting all required documents to clarify the matter. The company expressed confidence that Sebi would arrive at a correct conclusion and rejected all adverse media reports.