Sebi probe puts Rajesh Exports’ revenue under scrutiny

The regulator said Rajesh Exports misrepresented about ₹15.15 trillion, or $158.3 billion, in subsidiary revenue over five financial years.

India’s markets regulator has alleged that Rajesh Exports Ltd. misrepresented about ₹15.15 trillion, or about $158.3 billion, in revenue attributed to its subsidiaries over five financial years, deepening a probe into the disclosure practices of one of the country’s best-known gold and jewelry companies.

The Securities and Exchange Board of India passed an interim ex parte order on 3 June against the Bengaluru-based company and its chairman and managing director, Rajesh Mehta, citing prima facie findings of financial misrepresentation, fund-routing irregularities and non-cooperation during an ongoing investigation. The order is interim in nature, and the findings are not final.

Sebi said Rajesh Exports, which owns Swiss gold refiner Valcambi SA through overseas subsidiaries, reported 97% to 99% of its consolidated revenue from overseas subsidiaries and step-down subsidiaries, while failing to provide verifiable records to support those revenues despite repeated summons.

The regulator alleged that Rajesh Exports misrepresented about ₹15.15 trillion, representing 99.80% of revenue attributed to subsidiaries between FY21 and FY25. Sebi said the conduct appeared to have allowed the company to present an inflated and misleading picture of its operational scale, consolidated financial position and financial health to investors and the securities market.

Rajesh Exports has denied the allegations. Mehta told Reuters that the company’s financial disclosures were correct and that Sebi’s observations arose from differences in revenue calculation. He said the regulator had considered standalone figures rather than consolidated revenue, and argued that Valcambi refined about 3,000 metric tons of gold between FY21 and FY25, which would naturally generate revenue of more than ₹15 trillion.

The dispute goes to the heart of the company’s public financial profile. Rajesh Exports has long reported large consolidated revenues from gold refining and trading, a business in which turnover can be high and margins thin. Sebi’s concern is whether the revenue attributed to overseas subsidiaries was adequately supported, independently verifiable and fairly disclosed to investors.

The regulator said Valcambi was projected as the principal operating entity, but its audited standalone financial statements showed only negligible standalone revenue because they reflected value-addition or processing charges.

Sebi also said the unaudited revenue disclosed at the consolidated level by Global Gold Refineries AG, a holding company of Valcambi, was not supported by audited standalone financial statements, underlying transaction records or accounting basis.

Sebi said Rajesh Exports failed to disclose Valcambi’s audited financial statements on its website, keeping investors from knowing what the regulator described as the true and fair picture of the company’s financial affairs.

The interim order also raises questions beyond the headline revenue figure. Sebi alleged that Rajesh Exports recorded sale and purchase transactions of more than ₹114 billion each with Affluence Shares and Stocks Pvt. Ltd.

Affluence told Sebi that Rajesh Exports was never its client, no agreement or contract had been entered into with the company, and no sale or purchase transactions were executed with or on behalf of Rajesh Exports.

Sebi said the transactions recorded by Rajesh Exports with Affluence substantially corresponded with trades executed by Mehta in gold derivatives through his personal trading account. The regulator also said company funds had been transferred to Mehta and used for gold derivative trades, with only part of the amount returned after trading losses.

The order further alleged that related-party fund movements were not placed before the board or audit committee for approval. Sebi said its review of board and audit committee minutes for FY21 to FY24 did not show approval for routing substantial corporate funds through Mehta’s personal bank accounts.

Sebi has directed Rajesh Exports and Mehta to cooperate with the investigating authority and provide documents and explanations within 30 days. It has restrained Mehta from buying, selling or dealing in securities of Rajesh Exports, directly or indirectly, until further orders. The company has been directed to make true and fair disclosures of its financial statements, related-party transactions and other filings under listing regulations.

The regulator also directed the appointment of a fresh forensic auditor after noting that the earlier forensic audit had been completed without full cooperation from the noticees.

A copy of the order is also to be sent to the National Financial Reporting Authority for any appropriate action against the company’s statutory auditors.

Rajesh Exports is part of India’s listed jewelry and gold export sector and became globally prominent after acquiring Valcambi in 2015 for $400 million, according to Bloomberg.

Sebi said its findings are prima facie and that the investigation should continue without being influenced by the interim order.