When the Securities and Exchange Board of India (Sebi) passed a 109-page interim order against Rajesh Exports Ltd (REL), it did much more than merely flag accounting irregularities.
The market regulator effectively questioned whether a substantial part of the company’s reported business activity over several years was genuine and whether investors had been given a misleading picture of the company’s financial health.
At the heart of the order lies an extraordinary allegation. Sebi has prima facie found that approximately 97% to 99% of the company’s consolidated revenue appears inflated and unsupported by verifiable records. In simple terms, the regulator is questioning whether revenues running into several lakh crore rupees that were reported to investors actually had sufficient documentary backing.
The findings are so severe that Sebi itself described them as “egregious and unheard of.”
Rajesh Exports is one of India’s best-known gold refining and jewellery companies. It operates the Shubh Jewellers chain and has international operations through several subsidiaries.
According to the Sebi order, the company reported consolidated revenue of Rs 2.58 lakh crore in FY21, Rs 2.43 lakh crore in FY22, Rs 3.39 lakh crore in FY23, Rs 2.80 lakh crore in FY24, Rs 4.23 lakh crore in FY25 and Rs 7.78 lakh crore in FY26.
On paper, this made Rajesh Exports one of the biggest revenue-generating companies in India.
The problem, according to SEBI, is whether these numbers were supported by real underlying business transactions.
The investigation did not begin with a whistleblower from inside the company or a government agency.
It started after a shareholder filed a complaint with Sebi in March 2024 raising concerns about large trade receivables that had remained outstanding for more than two years.
Trade receivables are essentially money that customers owe a company. When receivables remain unpaid for a long time, regulators often examine whether the sales behind those receivables were genuine.
Following the complaint, Sebi launched an investigation and appointed BDO India Services as a forensic auditor.
WHAT TROUBLED SEBI FIRST
One of the first issues that caught Sebi’s attention was the huge gap between Rajesh Exports’ standalone revenue and consolidated revenue.
Standalone revenue refers to the revenue generated directly by Rajesh Exports in India.
Consolidated revenue includes the revenues of overseas subsidiaries and step-down subsidiaries.
The regulator found that almost all of the company’s reported revenue was coming from foreign subsidiaries.
According to the order, between 97% and 99% of the company’s consolidated revenue originated from overseas entities.
This immediately raised an important question.
If nearly all the revenue was coming from overseas subsidiaries, could the company provide transaction-level evidence supporting those sales?
SEBI says it repeatedly asked for such information.
The regulator sought customer-wise sales data, vendor-wise purchase records, invoices, confirmations, inventory records and other supporting documents.
According to the order, those records were never adequately provided.
SEBI noted: “The overwhelming majority (approx. 97%-99%) of REL’s consolidated revenues were attributed to overseas subsidiaries and step-down subsidiaries” and yet the company “failed to furnish verifiable records supporting such revenues despite repeated summons.”
THE VALCAMBI PUZZLE
A major focus of the investigation was Valcambi SA, a Swiss precious metals refiner controlled by Rajesh Exports through subsidiary structures.
Rajesh Exports told SEBI that Valcambi recognised only processing charges in its accounts while another group company recognised the gross value of gold transactions.
SEBI was unconvinced.
The regulator noted that Valcambi’s audited financial statements, audited by KPMG in Switzerland, reflected only processing income and not the massive revenues that eventually appeared in the group’s consolidated numbers.
SEBI observed that Rajesh Exports failed to provide accounting opinions, ownership records, inventory risk allocations, reconciliation statements or supporting documents explaining how revenues running into several lakh crore rupees were recognised elsewhere in the group.
The regulator described the accounting treatment as “internally inconsistent, commercially implausible and unsupported by verifiable underlying records.”
In simpler terms, SEBI is asking a basic question: if the operating company itself reported only processing income, where did the enormous revenues shown in the consolidated accounts come from?
SEBI REJECTS SWISS LAW ARGUMENT
Throughout the investigation, Rajesh Exports argued that Swiss data protection laws and confidentiality agreements restricted access to certain subsidiary-level information.
SEBI rejected this defence.
The regulator examined the Swiss Federal Act on Data Protection and concluded that it protects personal information of individuals, not corporate financial information.
SEBI further pointed out that the law itself contains exceptions permitting disclosures before competent authorities.
The regulator therefore concluded that Rajesh Exports could not use foreign confidentiality arrangements as a shield against Indian disclosure requirements.
The order states that a listed company operating in India’s securities market cannot rely on foreign confidentiality arrangements to dilute its obligations towards Indian investors.
INCONSISTENT SALES FIGURES
SEBI found another troubling issue.
The company submitted different sales figures to the regulator at different stages of the investigation.
When confronted with discrepancies, Rajesh Exports later requested SEBI to ignore earlier submissions and rely only on newer data.
SEBI refused.
The regulator noted that regardless of the format in which data was sought, the underlying sales figures should have remained consistent.
According to the order, the contradictions raised serious concerns about the reliability and authenticity of information furnished during the investigation.
The regulator concluded that the varying figures hindered its ability to independently verify the company’s reported revenues.
THE AFFLUENCE TRANSACTIONS
One of the most serious findings in the order relates to transactions routed through promoter Rajesh Mehta’s personal account.
According to Rajesh Exports, the transactions related to digital gold trading and Rajesh Mehta was merely acting as a conduit for the company.
SEBI says the company failed to provide any board approvals, audit committee approvals, authorisation letters or agreements supporting this explanation.
The regulator noted that the trades were executed through Rajesh Mehta’s personal account, the contractual relationship existed in his name and settlements occurred through his account.
SEBI therefore questioned whether these were genuinely company transactions.
The regulator’s findings are staggering.
According to the order, Rajesh Exports recorded non-genuine sales transactions worth Rs 11,486.60 crore and non-genuine purchase transactions worth Rs 11,488.42 crore through an entity called Affluence.
SEBI further observed that these transactions accounted for 74% of reported revenue in FY22, 86% in FY23 and 36% in FY24 on a standalone basis.
The regulator stated that the absence of direct banking transactions, lack of supporting documentation and denial by the counterparty collectively raised serious doubts about the genuineness of the transactions.
MISSING DOCUMENTS FOR PURCHASES
SEBI also examined transactions involving entities called Vienna Multiventures and Harshil Enterprise.
The company claimed purchases worth more than Rs 59 crore from these entities.
However, according to the regulator, there were no purchase orders, delivery challans, gate entries, inventory records or material receipt notes supporting the transactions.
SEBI also found no corresponding entries in GST records or bank statements.
In one instance, invoices were produced that were allegedly generated more than three years before the transactions were actually recorded in the books.
The regulator concluded that the explanations were not satisfactorily substantiated.
THE Rs 2,914 CRORE RECEIVABLE ISSUE
The original shareholder complaint focused on trade receivables.
SEBI’s investigation found that receivables worth Rs 2,914 crore were reduced through offsetting arrangements involving trade payables.
The regulator said the company failed to demonstrate any legally enforceable right to carry out such adjustments.
According to SEBI, investors were not given adequate disclosures explaining the nature of these adjustments.
The regulator therefore concluded that the company’s financial position may have been presented in a misleading manner.
THE AFRICAN GOLD MINES CLAIM
The order also examines claims made by the company regarding investments in African gold mines.
SEBI says it was unable to corroborate these claims from the financial statements available during the investigation.
The regulator questioned whether disclosures made earlier about such investments accurately reflected the underlying assets.
ROUTING OF FUNDS THROUGH PERSONAL ACCOUNTS
One theme repeatedly appears throughout the order.
SEBI says it found evidence suggesting routing and layering of corporate funds through personal accounts and related entities.
For readers unfamiliar with the term, layering refers to moving money through multiple entities or accounts, making it difficult to trace its origin and destination.
The regulator noted that several transactions involving promoter-linked entities lacked adequate documentation and disclosures.
WHY SEBI HOLDS RAJESH MEHTA RESPONSIBLE
SEBI has specifically named promoter and Executive Chairman Rajesh Mehta.
The order notes that he attended every board meeting and audit committee meeting during the relevant period.
Statements recorded during the investigation suggested that key decisions involving overseas subsidiaries, receivable adjustments and several financial matters were handled by him.
The regulator observed that transactions under scrutiny were directly connected to accounts under his control.
SEBI therefore concluded that such acts could not prima facie have occurred without his knowledge, involvement or acquiescence.
THE LEGAL VIOLATIONS ALLEGED BY SEBI
The order alleges violations under multiple provisions of securities laws.
These include:
Misleading investors through inflated and misleading financial statements.
Publishing financial statements that did not present a true and fair picture of the company’s affairs.
Failure to disclose related-party transactions.
Failure to comply with accounting standards.
Failure to publish subsidiary financial statements.
Failure to cooperate with SEBI’s investigation.
The regulator has also invoked provisions relating to fraudulent and unfair trade practices.
SEBI’S STRONGEST OBSERVATION
Perhaps the most damaging statement in the entire order appears near the conclusion.
SEBI states that the conduct identified in the investigation is not isolated or inadvertent but appears to be part of a “systematic and multi-year scheme of financial misrepresentation.”
The regulator further observed that investors continue to trade in the company’s shares without necessarily knowing the actual financial position of the company.
WHAT ACTION HAS SEBI TAKEN?
At this stage, SEBI has not passed a final order.
This is an interim ex-parte order, meaning the investigation is still continuing.
However, the regulator has already taken significant action.
Rajesh Mehta has been restrained from buying, selling or dealing in Rajesh Exports shares until further orders.
The company has been directed to provide documents and cooperate fully with investigators.
SEBI has ordered a fresh forensic audit because the earlier audit could not be completed satisfactorily.
The regulator has also directed Rajesh Exports to ensure true and fair disclosures in its financial statements and related-party transactions.
In addition, SEBI has forwarded the order to the National Financial Reporting Authority (NFRA) for examination of the conduct of the company’s statutory auditors.
WHY THIS CASE MATTERS
The Rajesh Exports case is important not merely because it involves a listed company.
It matters because the allegations strike at the heart of investor trust.
Financial statements are the primary documents investors rely upon when deciding whether to buy or sell shares.
If revenues, profits, receivables, transactions or disclosures are materially inaccurate, investors may end up making decisions based on a distorted picture of reality.
SEBI’s order does not yet represent a final finding of guilt.
Rajesh Exports and Rajesh Mehta will have opportunities to present their defence.
However, the interim findings are among the most serious seen in a major Indian listed company in recent years.
For now, the central question raised by SEBI remains unanswered: were revenues running into several lakh crore rupees genuinely supported by real business activity, or were investors presented with a financial picture that was very different from reality?
The answer to that question will ultimately determine the final outcome of one of the biggest accounting and disclosure investigations currently underway in India’s stock market.