SEBI bars Rajesh Exports CMD after FY21-FY25 probe

What SEBI ordered in its interim action

Markets regulator SEBI has passed an interim order against Rajesh Exports Ltd (REL) and its chairman and managing director Rajesh Mehta, restricting Mehta from buying, selling, or otherwise dealing in the company’s securities. The restraint was described as applying “until further orders” in the interim direction, while another account of the order described a three-year bar from dealing in the company’s securities. SEBI’s order is interim in nature and the regulator indicated that further action may follow based on the outcome of ongoing proceedings.

SEBI also directed Rajesh Exports to cooperate with the investigating officer and forensic auditors examining the company’s books. The regulator asked the company to make “true and fair” disclosures in its financial statements and in related-party transactions, and to strengthen disclosures under the Listing Obligations and Disclosure Requirements (LODR) framework. Separately, the interim directions included a requirement to provide pending information sought by investigators within 30 days.

Timeline: complaint, investigation, and the June 3 order

The regulatory action stems from a shareholder complaint received in March 2024. The complaint raised concerns over large outstanding trade receivables reflected in the company’s books, which prompted SEBI’s review and subsequent investigative steps.

SEBI issued a 109-page interim order dated June 3. The order referenced SEBI’s investigation and a forensic review that, according to the regulator, had already surfaced prima facie concerns around the company’s accounting, disclosures, and cooperation during the ongoing process.

Core allegation: revenue inflation linked to overseas subsidiaries

SEBI’s initial findings indicated that, over several years starting FY21, Rajesh Exports may have manipulated its books of accounts. The regulator’s focus, as described in the interim order, was on revenues attributed to overseas subsidiaries.

The interim findings described the alleged scale of inflation as extreme. SEBI said the investigation and forensic review uncovered prima facie evidence suggesting that about 97%-99% of the company’s revenue may have been inflated, and characterised the findings as “egregious and unheard of.”

In another quantified description of the alleged overstatement, SEBI’s preliminary findings alleged misrepresentation of ₹1,515,000 crore of revenues attributable to subsidiaries during FY21-FY25, representing about 99.8% of such revenues. SEBI said the disclosures appeared to present an inflated and misleading picture of the group’s operational scale and financial health to investors.

Subsidiary financials and disclosure gaps under LODR

The interim order also linked the matter to alleged non-disclosure of financial statements of certain subsidiaries of Rajesh Exports. SEBI’s directions required the company to make disclosures related to financial statements and related-party transactions, and to ensure that disclosures are true and fair.

SEBI’s order also noted issues connected to the company’s disclosure and governance practices during the investigation, including references to non-cooperation concerns. The regulator stated that it would continue examining findings emerging from its investigation into the company’s accounting and disclosure practices.

Fund-routing and derivatives trading allegations

Beyond revenue recognition and disclosures, SEBI’s interim action referred to concerns around fund flows. One account of the regulator’s findings said REL transferred company funds to Mehta’s personal account for derivative trading through his account with stockbroker Affluence Shares and Stocks.

The interim order also described prima facie findings of fund-routing irregularities and broader governance lapses during the ongoing probe. SEBI linked its restraint on Mehta to his role as a key decision-making authority at the company, with significant control over daily affairs and financial operations, including subsidiaries.

Fresh forensic audit and information deadline

SEBI ordered the appointment of a fresh forensic auditor to conduct a more detailed review of the company’s books and transactions. The regulator also directed Rajesh Exports to provide all pending information sought by investigators within 30 days.

These steps sit alongside SEBI’s direction to cooperate with investigators and forensic auditors already involved, and to improve disclosures in financial statements and related-party transactions. The interim directions indicate the regulator is treating the matter as active and developing, rather than concluded.

Additional restraints referenced in the interim directions

One description of the interim order stated that SEBI directed an immediate freeze on the demat accounts of the company and the promoter until further orders, clarifying that equity shares held by Mehta in his demat accounts would remain frozen. The same account also said SEBI restrained Mehta from associating as a director or key managerial personnel (KMP) of any listed public company or any SEBI-registered intermediary intending to raise money from the public, until further orders.

These measures, as described, are aimed at preserving the status quo while the regulator completes further scrutiny of the company’s records, disclosures, and fund flows.

Key facts at a glance

Why the order matters for shareholders and disclosures

For investors, the regulator’s interim findings put the spotlight on the reliability of reported revenues and the quality of disclosures around subsidiaries and related-party transactions. When a regulator points to potential revenue inflation at the level described in SEBI’s order, it typically raises immediate questions around financial statement credibility, audit processes, and internal controls.

The focus on overseas subsidiaries and non-disclosure of certain subsidiary financial statements also matters because consolidated numbers and group structure disclosures are central to how listed companies communicate scale, profitability, and risk. SEBI’s directions emphasise that the company must make true and fair disclosures and cooperate fully during investigations.

What to watch next

SEBI has described the order as interim, with further regulatory action possible depending on the outcome of ongoing proceedings. Near-term milestones include the company’s submission of pending information within the 30-day timeline and the scope and findings of the fresh forensic audit.

Any subsequent SEBI orders or company disclosures on subsidiary financials, related-party transactions, and revised reporting will be important reference points for the market as the matter progresses.

Conclusion

SEBI’s interim action against Rajesh Exports and Rajesh Mehta follows a March 2024 complaint and a subsequent investigation and forensic review that, according to the regulator, found prima facie signs of large-scale revenue inflation and disclosure lapses. The regulator has restrained the promoter’s trading in company securities and ordered deeper forensic scrutiny, while directing the company to provide information within 30 days and strengthen financial and related-party disclosures under LODR. The next phase will depend on the additional forensic work and SEBI’s ongoing proceedings.