The Securities and Exchange Board of India (SEBI) has issued an interim order against Rajesh Exports Ltd. and its founder, Rajesh Mehta, alleging a massive Rs 15.15 lakh crore revenue inflation over a five-year period. This staggering figure, equivalent to nearly 20% of India's annual export value, has prompted concerns from financial experts like Ritesh Jain, founder of Pinetree Macro.
SEBI's Allegations of Financial Irregularities
According to SEBI's interim directive, the capital markets watchdog found prima facie evidence that Rajesh Exports inflated its revenue by Rs 15.15 lakh crore between fiscal years 2020-21 and 2024-25. This alleged misrepresentation accounts for 99.80 percent of the total revenue attributed to its overseas subsidiaries.
The regulator's investigation specifically highlighted the company's Swiss subsidiary, Valcambi SA, which Rajesh Exports claimed was driving its multi-lakh-crore global trade. However, SEBI discovered that Valcambi SA's actual audited standalone revenue constituted less than half a percent of the figures reported by the parent company. Furthermore, SEBI alleged the creation of billions in fictitious transactions, including over Rs 11,487 crore in sales and Rs 11,488 crore in purchases, by mirroring gold derivative trades executed by Rajesh Mehta in his personal capacity.
SEBI also noted that Rajesh Exports failed to disclose the audited financial statements of Valcambi SA on its website, thereby allegedly keeping investors uninformed about the true financial state of the company. Beyond revenue inflation, the regulatory body also claims that the management diverted corporate funds into various channels without proper board approvals or necessary statutory disclosures.
Regulatory Action and Expert Reaction
As a result of these findings, SEBI has barred Rajesh Exports and its founder and executive chairman, Rajesh Mehta, from accessing the securities market. The magnitude of the alleged manipulation has raised eyebrows across the financial community. Ritesh Jain, responding to the news, questioned the broader implications for India's trade numbers, asking, "Does that mean that India’s exports are overvalued to the tune of $158 billion cumulatively over years. How is this possible?"
Rajesh Exports Denies Wrongdoing
In an exchange filing issued on June 4, Rajesh Exports clarified that SEBI's directive is an interim order with "no conclusive adverse findings of any kind." The company asserted that it has "done no wrong" and maintained that its reported financial revenues are accurate.
The company attributed the core observation regarding revenue misreporting to a "confusion" arising because SEBI considered the EBIDTA (Earnings Before Interest, Taxes, Depreciation, and Amortization) of Valcambi SA instead of its total revenue. Rajesh Exports stated that this difference in accounting interpretation led SEBI to conclude a 97% discrepancy in revenue figures.