India's market regulator, the Securities and Exchange Board of India (SEBI), has issued an interim order barring Rajesh Exports Ltd. and its promoter, Rajesh Mehta, from accessing the securities market. This significant action comes amidst serious allegations of financial misrepresentation and diversion of company funds.
Following the news, shares of Rajesh Exports plunged 5 percent to Rs 104.65 in early trade on Thursday. The company's stock has now declined by approximately 45 percent over the past six months, reflecting investor concerns over the unfolding investigation.
Allegations of Massive Revenue Misrepresentation
SEBI's interim order details accusations that Rajesh Exports misrepresented an astonishing Rs 15.15 lakh crore in revenues between the financial years 2021 and 2025. This figure reportedly accounts for 99.80 percent of the revenues generated by the company's subsidiaries.
The regulator highlighted that a substantial portion, 97-99 percent, of Rajesh Exports' consolidated revenue was attributed to its overseas subsidiaries, particularly Switzerland-based Valcambi SA. However, SEBI alleges that the company consistently failed to disclose the financial statements of these subsidiaries in the public domain. Despite Valcambi SA being presented as the group's primary operating entity, its audited standalone financial statements showed negligible revenues, raising red flags for the regulator.
Fund Diversion and Unapproved Transactions
Beyond revenue misrepresentation, SEBI has also flagged questionable transactions involving Affluence Shares and Stocks Pvt Ltd. Rajesh Exports reportedly declared sales of Rs 11,487 crore and purchases of Rs 11,488 crore with Affluence. Yet, Affluence allegedly denied conducting any such transactions.
SEBI's investigation suggests these were "non-genuine accounting entries" linked to promoter Rajesh Mehta's personal derivatives trading activities. These entries were allegedly used to inflate turnover without any genuine economic substance.
Furthermore, the regulator claims that Rajesh Exports routed Rs 339 crore of company funds to accounts connected to Rajesh Mehta, including for his personal derivative trades. These transactions were reportedly conducted without the necessary approvals from the board or audit committee and lacked proper related-party disclosures. In total, SEBI estimates that Rs 926 crore was routed through such unapproved and undisclosed transactions.
Impact on Shareholders
The alleged misrepresentation of financial statements and diversion of funds have had a severe impact on the company's investors. SEBI estimates that these actions have led to a wealth erosion of Rs 12,726 crore for shareholders, including a significant number of retail investors.
As of now, Rajesh Exports has not released an official statement regarding SEBI's interim order or the ongoing investigation. The ban on accessing the securities market will remain in effect until SEBI completes its full investigation into these serious allegations.