Case Study Report: SEBI Interim Order against Rajesh Exports Limited (REL)
This report details the
significant regulatory action taken by the Securities and Exchange Board of
India (SEBI) on June 3, 2026, against Rajesh Exports Limited (REL) and its
promoter, alleging massive financial misrepresentation and non-cooperation.
i. Introduction
and Regulatory Context
The
Securities and Exchange Board of India (SEBI) issued an extensive
109-page Interim Ex-Parte Order on June 3, 2026, against Rajesh
Exports Limited and its Chairman and Managing Director (CMD), Rajesh
Mehta. The order was passed by Whole-Time Member Kamlesh Chandra Varshney.
The
action stemmed from an investigation launched after a shareholder complaint
received in March 2024 raised serious concerns over large outstanding trade
receivables in the company’s books. SEBI described the preliminary
findings as "egregious and unheard of" due to the scale of the
financial manipulation. The formal investigation covered the financial
period from April 2020 to March 2024.
ii.
Key Findings and Allegations
SEBI’s
investigation and forensic review, conducted by BDO India Services Pvt Ltd,
uncovered multiple instances of systemic misrepresentation and fraud at the
group level:
a. Massive
Revenue Inflation
· SEBI
alleged a mass misrepresentation of financial statements from the fiscal years
FY2021 to FY2025.
· Consolidated
Revenue: The regulator found a revenue inflation aggregating
approximately ₹15.15 lakh crore ($158.30 billion) over the
five-year period.
· Scale
of Inflation: This misstated amount accounted for
nearly 99.8% of the total consolidated revenue attributed to
overseas subsidiaries. Prima facie evidence suggested that about 97% to
99% of the company's revenue may have been inflated.
· Overseas Subsidiaries: The
manipulation focused heavily on the revenues reported by overseas entities,
particularly the Swiss precious metals refiner, Valcambi SA. The
consolidated revenue from these subsidiaries was found to be disproportionately
large compared to the minimal standalone revenues reported by the Swiss entity
in its audited financials.
· Standalone Misstatement: Allegations also covered standalone financials, with a misstatement of ₹12,557 crore in standalone revenues during FY2021-FY2024.
b. Fund
Diversion and False Transactions
SEBI
detailed specific instances of fund routing and misleading accounting entries:
· Disguised
Personal Trading: The company recorded false gold sales
(₹11,487 crore) and purchases (₹11,488 crore) with a stockbroker, Affluence
Shares and Stocks Private Limited. The broker, however, denied having any
such transactions with REL. SEBI alleged that these false entries were
used to disguise personal gold derivative trades undertaken by CMD Rajesh Mehta
in his personal account.
· Diversion
of Corporate Funds: Corporate funds totalling up to ₹9.26
billion were allegedly transferred to Rajesh Mehta’s personal accounts for
purposes including derivative trades, without board or audit committee approval
and without adequate related-party disclosures.
c. Misrepresentation
of Assets
The company failed to
provide supporting documentation for non-current investments of ₹1,035 crore,
which it had claimed were investments in gold mines in Africa in
FY2023. SEBI noted the company failed to furnish any breakup,
reconciliation, or valuation report demonstrating the existence of the alleged
assets.
d. Systemic
non-cooperation
SEBI cited persistent
non-cooperation by the company and its promoter throughout the investigation,
which significantly constrained the forensic review.
· Withholding
Access: The company failed to provide access to key
accounting systems, including ERP, and withheld critical financial records and
complete documentation sought by the forensic auditor (BDO India Services Pvt
Ltd).
· Verification
Constraint: The auditor was unable to independently
verify large portions of the company’s transactions, with only a small fraction
of sampled transactions being fully substantiated with documents.
iii. Regulatory
Action and Directions
Given the severity of the
findings, SEBI issued the following immediate and interim directions to protect
investors and market integrity:
·
Restriction on CMD: CMD
Rajesh Mehta has been immediately restrained from buying, selling, or dealing
in the securities of Rajesh Exports Limited until further orders.
·
Cooperation Mandate: Rajesh
Exports was directed to immediately cooperate fully with the investigating
officer and forensic auditors.
·
Information Submission: The
company should provide all pending information sought by investigators
within 30 days of the order.
· Disclosure Requirements: The
company was ordered to make "true and fair" disclosures in its
financial statements, strengthen compliance under the Listing Obligations and
Disclosure Requirements (LODR) framework, and publicly publish all outstanding
separate audited financial statements of its subsidiaries on its website.
·
Further Action: SEBI
has ordered the appointment of a fresh forensic auditor to
conduct a more detailed review of the books and
transactions.
·
Additionally, the regulator referred the
conduct of the company’s statutory auditors (BSD & Co) for the offending
years to the National Financial Reporting Authority (NFRA) for
appropriate action.
The misrepresentation and fund diversion were estimated to have caused shareholder wealth erosion amounting to ₹127.26 billion.
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