Rajesh Exports Chairman Rajesh Mehta has categorically denied allegations of fund diversion levelled by the Securities and Exchange Board of India (SEBI), asserting that neither shareholder money nor company funds were used for the benefit of promoters.
“Not a single rupee of the funds of the company, neither shareholder funds nor company funds, has been diverted for any promoter’s sake,” Mehta told businessline.
His comments come after SEBI, in an interim order, alleged that Rajesh Exports had prima facie misrepresented nearly ₹15.15 lakh crore in revenues linked to its subsidiaries and step-down subsidiaries between FY21 and FY25.
The regulator said the alleged misstatement accounted for around 99.8 per cent of the revenues attributed to the company’s overseas entities, creating what it described as an “inflated and misleading picture” of operations.
SEBI further alleged that Rajesh Exports failed to place the financial statements of its overseas subsidiaries in the public domain despite projecting Switzerland-based Valcambi SA as its principal operating entity. The regulator noted that between 97 per cent and 99 per cent of the company’s consolidated revenue originated from overseas subsidiaries, particularly Valcambi.
The order also flagged alleged fictitious transactions involving Affluence Shares and Stocks Private Limited.
According to SEBI, Rajesh Exports recorded sales of ₹11,487 crore and purchases of ₹11,488 crore with the entity, even though Affluence reportedly denied carrying out such transactions. The regulator in its comments had noted that these entries were linked to Mehta’s personal derivative positions and were used to artificially inflate turnover.
Responding to the allegations, Mehta maintained that the observations related to investments undertaken by overseas step-down subsidiaries and not by the listed parent entity directly.
“These are investments made by the step-down subsidiaries of the company. These are foreign transactions and not investments made directly by the parent company. Everything is very clear, and all documents have been submitted,” he said.
Mehta added that the company had already furnished all information sought by the regulator. “We have submitted all the documents, reports, and everything required. Nothing was pending, and they themselves were satisfied. We have not received any communication from SEBI for the last three months. Whatever observations have been made now these are interim in nature, we will address them point by point, and I am quite confident SEBI (will understand our position),” he said.
Addressing concerns over long-pending trade receivables, Mehta attributed the delays to disruptions caused by the Covid-19 pandemic. He said a significant portion of the receivables had subsequently been recovered, including amounts received within two years of funding.
Pricing practices
However, experts say the matter could extend beyond securities market regulations. Manish Garg, Partner-Tax at AKM Global, said the alleged overstatement of revenues through overseas entities could invite scrutiny from income-tax authorities, particularly on the authenticity of cross-border transactions, transfer pricing practices, commercial substance and fund flows. He added that authorities could also examine whether the transactions indicate profit shifting, layering or circular movement of funds.
Separately, Shriram Subramanian, Founder and MD of InGovern Research Services, flagged governance concerns around the company, noting that no analyst actively covers Rajesh Exports and that the company does not conduct quarterly analyst calls, both of which are generally considered red flags from an investor communication perspective.
Ameet Patel, a leading Chartered Accountant said that the Rajesh Exports case exposes loopholes in the system: India has no automatic mechanism to tax foreign subsidiaries and therefore relies on slow, fact-intensive investigative tools.
Layered chains of overseas companies make money flows difficult to trace, while consolidated accounts can obscure what individual entities actually did.
For instance companies have invoked Swiss data-protection laws to refuse access to records, and India’s treaty-based information-sharing framework is often slow and limited, providing little or no access to a company’s underlying books of accounts.’