Rajesh Exports, one of India’s largest gold refiners and jewellery exporters, has come under severe regulatory scrutiny after the Securities and Exchange Board of India (Sebi) accused the company of misrepresenting
its financial statements and inflating its revenue scale over several years.
The regulator has barred promoter and CEO Rajesh Mehta from dealing in the company’s securities until further orders and has ordered a fresh forensic audit.
But what exactly is Sebi alleging? Did Rajesh Exports report sales that never happened? And why has the regulator described the case as one involving “egregious and unheard of” discrepancies?
Here’s a simple explanation.
The Heart of Sebi’s Allegation
The dispute centres on Rajesh Exports’ consolidated financial statements.
When investors looked at the company’s annual reports, they saw a giant global business reporting revenues running into several lakh crore rupees every year.
However, Sebi says almost all of those revenues came from overseas subsidiaries, particularly Switzerland-based Valcambi SA, and the underlying records supporting those revenues were either not disclosed or could not be independently verified.
According to the regulator, 97% to 99% of Rajesh Exports’ consolidated revenue came from overseas subsidiaries.
“The aberrations prima facie noted in the matter, where approx. 97% to 99% of the revenue of the Company is inflated, are egregious and unheard of,” Sebi said in its interim order.
What Is The Difference Between Standalone And Consolidated Revenue?
To understand the issue, investors need to know the difference between standalone and consolidated accounts.
Standalone accounts show the business done directly by Rajesh Exports in India, while consolidated accounts combine the numbers of Rajesh Exports and all its subsidiaries across the world.
For example, in FY25, Rajesh Exports reported standalone revenue of only about Rs 7,027 crore. But its consolidated revenue was more than Rs 4.23 lakh crore.
In other words, almost the entire business shown to investors was coming from subsidiaries rather than the Indian parent company.
That by itself is not illegal. The question is whether those subsidiary revenues were genuine and properly supported.
Why Did Valcambi Become The Focus?
Rajesh Exports repeatedly told Sebi that Valcambi SA was the principal operating entity of the group. Valcambi is a Swiss precious metals refinery that refines gold and manufactures bullion products.
Naturally, Sebi examined Valcambi’s financial statements.
What it found raised questions.
While Rajesh Exports’ consolidated accounts reflected revenues of several lakh crore rupees, Valcambi’s audited standalone financial statements showed revenues running into only a few hundred crore rupees annually.
For example, Sebi noted that Valcambi reported revenue of about Rs 543 crore in calendar year 2023, while Rajesh Exports’ consolidated revenue for the corresponding period exceeded Rs 2.8 lakh crore.
Why Did This Raise Red Flags?
Imagine a restaurant owner claims his chain generated Rs 10,000 crore in annual sales. But, when regulators examine the accounts of the restaurant that is supposedly generating most of the business, they find only Rs 20 crore in reported revenue.
The obvious question becomes: where did the remaining revenue come from?
That is essentially the question Sebi is asking Rajesh Exports.
According to the order, if Valcambi was indeed the main operating business, its audited numbers should have broadly supported the scale of revenue being shown in the consolidated accounts.
Instead, Sebi found a huge gap between the two.
Rajesh Exports’ Explanation
The company argued that Valcambi’s standalone accounts only reflected processing charges or value addition. According to Rajesh Exports, the larger consolidated numbers included the gross value of gold transactions handled by group entities.
Sebi, however, said it was unable to verify this explanation because the company failed to provide sufficient transaction-level records, customer details, vendor information, invoices and supporting documents despite repeated requests.
As a result, the regulator said the reported consolidated revenues could not be independently verified.
The Rs 15.15 Lakh Crore Figure
This is the number that has attracted the most attention. After comparing the revenues attributed to subsidiaries with the audited revenues disclosed by Valcambi, Sebi estimated that approximately Rs 15.15 lakh crore of revenue attributed to subsidiaries between FY21 and FY25 appeared to be misrepresented.
Importantly, Sebi has not concluded at this stage that cash of Rs 15.15 lakh crore disappeared.
Its allegation is that the operational scale and revenue reported to investors were materially overstated and unsupported by verifiable records.
Why Was The Lack Of Disclosure Important?
Sebi also found that Rajesh Exports did not upload the financial statements of several overseas subsidiaries on its website despite legal requirements to do so.
The regulator said investors were therefore unable to independently assess the financial health of the entities that generated almost all of the group’s reported revenue.
In Sebi’s view, this created a situation where investors saw massive consolidated revenues but had no practical way to verify the underlying numbers.
The Separate Allegation Of Fund Diversion
The case is not limited to revenue issues. Sebi has separately alleged that company funds were routed to promoter Rajesh Mehta’s personal accounts and used for derivatives trading without required approvals and disclosures.
The regulator has alleged that hundreds of crores of rupees moved through such transactions without proper corporate approvals.
Has Sebi Proven The Charges?
No. The June 3 order is an interim order based on prima facie findings. That means Sebi believes there is enough material to justify immediate regulatory action while the investigation continues.
Rajesh Exports and Rajesh Mehta will have the opportunity to present their defence and challenge the regulator’s findings.
