Jewellery manufacturer Rajesh Exports, a beneficiary of India's Production Linked Incentive (PLI) scheme for Advanced Chemistry Cell (ACC) Battery Storage, may lose its incentive status. This development follows an interim order issued by the Securities and Exchange Board of India (SEBI) alleging significant financial irregularities.
SEBI Alleges Massive Revenue Misrepresentation
SEBI's interim order accuses Rajesh Exports of misrepresenting a substantial portion of its revenue over a five-year period, from FY21 to FY25. The market regulator claims that approximately 99.80% of the revenues generated by the company's overseas subsidiaries, particularly Switzerland-based Valcambi SA, amounting to around Rs 15.15 lakh crore, were misrepresented. Additionally, SEBI alleges that the company diverted funds without necessary approvals or disclosures.
As a consequence of these findings, SEBI has barred Rajesh Exports and its founder and Executive Chairman, Rajesh Mehta, from accessing the securities market until its investigation is complete. A key concern for the regulator was the company's alleged failure to consistently disclose the financial statements of its subsidiaries in the public domain, despite 97-99% of its consolidated revenue originating from these overseas entities.
Company Responds to Allegations
In response to SEBI's interim order, Rajesh Exports has stated that the discrepancies stem from a "confusion and communication gap." The company maintains that its reported revenues are correct and attributes SEBI's observations to the regulator considering Valcambi's EBITDA instead of its total revenue, leading to the stated difference in figures.
Rajesh Exports expressed confidence in clarifying the matter with SEBI by providing all necessary documents and information.
PLI Scheme Context and Impact
Rajesh Exports was among four companies selected in 2022 to receive incentives under the Rs 18,100 crore PLI scheme, designed to boost local battery cell production. The scheme aimed to allocate 50 GWh of battery capacity, with incentives disbursed upon the sale of batteries manufactured in India, emphasizing domestic value addition.
The potential removal of Rajesh Exports from this scheme comes amidst consideration by the Ministry of Corporate Affairs for an investigation into the company's financial reporting practices. Following the news, shares of Rajesh Exports saw a decline, hitting a low of Rs 99.45, marking a significant drop over the past six months.