The Securities and Exchange Board of India (SEBI) has issued an interim order barring jewellery manufacturer Rajesh Exports Ltd. and its promoter, Rajesh Mehta, from participating in the securities market. This action comes amid a comprehensive investigation into allegations of significant financial misrepresentation and fund diversion within the company.
Allegations of Massive Revenue Misstatement
SEBI's interim order highlights serious concerns regarding Rajesh Exports' financial reporting. The regulator alleges that the company misrepresented approximately Rs 15.15 lakh crore of its consolidated revenue, accounting for nearly 99.80 percent of the revenues generated by its subsidiaries between the financial years 2021 and 2025.
A significant portion of this revenue, estimated at 97-99 percent, reportedly originated from its overseas subsidiaries, particularly Switzerland-based Valcambi SA. However, SEBI noted that the company consistently failed to disclose the financial statements of these subsidiaries in the public domain. Compounding the issue, Valcambi SA, presented as the group's principal operating entity, reportedly showed negligible revenues in its audited standalone financial statements.
Non-Genuine Transactions Flagged
The market regulator also scrutinized transactions involving Affluence Shares and Stocks Pvt Ltd. Rajesh Exports had reported sales of Rs 11,487 crore and purchases of Rs 11,488 crore with Affluence. However, Affluence reportedly denied any involvement in such transactions, leading SEBI to allege these were non-genuine accounting entries. These entries are believed to be linked to Rajesh Mehta's personal derivatives trading activities, designed to inflate turnover without any underlying economic substance.
Fund Diversion Accusations
Further allegations include the diversion of company funds. SEBI claims that Rajesh Exports routed Rs 339 crore of company funds into accounts associated with promoter Rajesh Mehta, including for his personal derivative trades. These transactions were reportedly executed 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 transactions without the required corporate governance oversight.
Shareholder Impact and Ongoing Investigation
SEBI has estimated that these alleged financial irregularities, including the misrepresentation of financial statements and the diversion of funds, have led to a substantial wealth erosion of Rs 12,726 crore for the company's shareholders, including retail investors. The interim order remains in effect until SEBI completes its full investigation into these grave allegations. As of the latest reports, Rajesh Exports has not yet issued an official statement regarding the matter.