Shares of Rajesh Exports Ltd hit the 5% lower circuit on Wednesday after market regulator Sebi passed an interim order against the company and its promoter, Rajesh Mehta, alleging large-scale financial irregularities, possible revenue inflation and non-cooperation during an ongoing investigation.
The sharp fall came after Sebi said a forensic review had found prima facie evidence suggesting that nearly 97-99% of the company’s reported revenue may have been inflated, calling the findings “egregious and unheard of.”
The regulator has barred promoter Rajesh Mehta from buying, selling or dealing in Rajesh Exports securities until further orders.
The stock came under intense selling pressure after Sebi’s interim order raised serious questions over the authenticity of the company’s financial statements.
According to the regulator, its investigation and forensic review uncovered prima facie evidence that a substantial portion of Rajesh Exports’ reported revenue may not be genuine. Sebi said approximately 97% to 99% of the company’s revenue appeared to be inflated based on the findings available so far.
Such allegations are among the most serious that can be levelled against a listed company because they directly impact investor confidence in the company’s reported earnings, revenue and financial health.
The development triggered panic selling in the stock, pushing it to the lower circuit limit.
The market regulator has accused Rajesh Exports of financial misrepresentation, failing to cooperate with investigators and withholding key records required for a forensic audit.
According to Sebi, the company did not provide access to critical accounting systems, failed to furnish complete documentation and withheld important financial records sought by investigators and forensic auditors.
The regulator said the forensic auditor was unable to independently verify large portions of the company’s transactions because supporting records were incomplete or unavailable. Only a small fraction of sampled transactions could be fully substantiated through documentation.
The investigation was launched after a shareholder complaint received in March 2024 raised concerns about large outstanding trade receivables on the company’s books.
The order, which runs over 100 pages, stems from an investigation covering the period between April 2020 and March 2024. Sebi had appointed BDO India Services as the forensic auditor to examine the company’s books.
The regulator also raised concerns about transactions involving overseas subsidiaries and step-down subsidiaries, including entities in Singapore and Switzerland. These included REL Singapore, Global Gold Refineries AG and Swiss precious metals refiner Valcambi.
According to Sebi, the lack of access to underlying accounting records significantly restricted the forensic review and prevented independent verification of several reported figures.
The regulator further alleged that funds may have been routed in a manner that obscured their origin and destination, raising questions about the authenticity of the company’s financial statements.
Given the seriousness of the findings, Sebi said immediate intervention was necessary to protect investors and maintain market integrity.
The regulator has restrained promoter Rajesh Mehta from dealing in Rajesh Exports securities until further orders. It has also directed the company to provide all pending information sought by investigators within 30 days.
In addition, Sebi has ordered the appointment of a fresh forensic auditor to conduct a more detailed review of the company’s books and transactions.
The Sebi order is currently an interim order and the investigation is still ongoing. However, the allegations have significantly increased uncertainty around the company.
Investors are likely to closely monitor the company’s response, future regulatory developments and the findings of the fresh forensic audit ordered by Sebi.
For now, the market appears focused on the seriousness of the allegations, which is why Rajesh Exports shares witnessed sharp selling pressure and hit the lower circuit following the regulator’s action.