The Rajesh Exports Case: What SEBI's Interim Order Alleges And What Happens Next

Rajesh Exports built its name as a global gold and jewellery powerhouse, with consolidated revenues that routinely placed it among India's largest listed companies. That reputation is now under serious scrutiny.

On June 3, SEBI issued an interim order against the Bengaluru-based company and its promoter-chairman Rajesh Mehta, alleging financial misrepresentation worth ₹15.15 lakh crore across five financial years and barring him from accessing the securities market.

Mehta denied the allegations. "It is an interim order and nothing in it is true," he told Moneycontrol on June 4. "We are in the process of studying it and will prepare a response," he added.

Point to note: SEBI's findings remain interim, and the investigation is still underway.

What Triggered the Probe

The matter came to light through a shareholder complaint filed with SEBI in March 2024.

The complainant alleged potential financial misrepresentation in the company's books, flagging a large sum of trade receivables that had remained outstanding for over two years.

SEBI initiated a formal investigation in October 2024 and subsequently engaged forensic auditor BDO to examine the company's financial disclosures.

What SEBI Found

The regulator's central allegation concerns the source and authenticity of the company's reported revenues. Between FY21 and FY25, SEBI said, between 97% and 99% of Rajesh Exports' consolidated revenues were attributed to overseas subsidiaries, with Valcambi SA, a Switzerland-based gold refinery and a key part of the group's international operations, being the most significant contributor.

When auditors attempted to verify these figures against subsidiary-level records, they found the numbers did not match up. The gap between what was reported at the consolidated level and what could actually be substantiated from underlying records amounted to ₹15.15 lakh crore over the five-year period.

SEBI alleged these entries were non-genuine and were linked to Mehta's personal derivative trades, serving to artificially inflate the company's reported turnover.

To illustrate the scale of the mismatch, SEBI pointed to Valcambi's audited standalone revenue for CY2023, which stood at just ₹542.68 crore.

In the same period, group entity GGR reported consolidated revenue of ₹2.93 lakh crore, while Rajesh Exports reported ₹2.81 lakh crore at the consolidated level.

The company explained that the gap arose because Valcambi recognised only processing income while GGR accounted for gross gold transaction values. SEBI said this explanation was not backed by sufficient documentary evidence and remained unconvinced at the interim stage.

SEBI Whole-Time Member Kamlesh Chandra Varshney, in the interim order, raised fundamental questions regarding the company's arguments.

“It is not clear as to how the consolidating entity changes fundamental of accounting by including the market value of goods belonging to third party as its revenue, when the operating entity itself accounts for only value addition (as it does not claim to take ownership of goods belonging to someone else)," he said.

Notably, investigators faced significant hurdles in verifying the company's financials.

SEBI said Rajesh Exports did not provide complete customer records, vendor details, or financial statements of key subsidiaries despite repeated summons. The company's statutory auditors, too, came under scrutiny, having committed during depositions to submit audit working papers, they subsequently failed to do so.

SEBI said this pattern of non-cooperation pointed to a deliberate attempt to withhold material information from regulators.

More Allegations: Africa Assets, Disputed Counterparty

Beyond the revenue figures, SEBI flagged two additional concerns.

First, the company claimed investments worth ₹1,035 crore in gold mining assets in Africa, but was unable to produce valuation reports, entity-wise breakups, or reconciliation statements to support those figures.

Second, the regulator examined transactions between Rajesh Exports and an entity called Affluence Shares and Stocks, where the company had recorded sales of ₹11,487 crore and purchases of ₹11,488 crore. When investigators approached Affluence, the entity denied any business relationship with Rajesh Exports, stating that the company was never its client and that no such transactions had taken place.

SEBI also raised concerns about how company funds were being used.

The regulator alleged that money was moved from company accounts into Mehta's personal accounts and used for derivative trading. Transactions worth ₹7.4 crore were traced to his personal accounts, a portion of which was subsequently returned to the company. These fund movements, SEBI said, were neither approved by the board nor disclosed to investors as related-party transactions. The regulator further alleged that gold derivative trades were executed through Mehta's personal trading account while the corresponding entries appeared in the company's books.

Who Bears the Cost

The potential fallout for investors is significant. SEBI estimated shareholder wealth erosion linked to the alleged misconduct at up to ₹12,726 crore.

Among the company's largest shareholders is LIC, which holds around 10.8% of Rajesh Exports, a stake ultimately backed by policyholders' premiums.

Shares of Rajesh Exports fell 5% on Thursday, a day after the SEBI passed the order. The stock hit the lower circuit at ₹103.92, extending a decline that has seen the stock lose more than 80% of its value over the past three years.

SEBI has directed Rajesh Exports and Mehta to submit all sought documents and explanations within 30 days and has ordered the appointment of a new forensic auditor to complete the audit of the company's books.

It is to be noted that Rajesh Exports and Mehta retain the right to present their defence. The regulator's findings, at this stage, remain interim.