SEBI order flags Rajesh Exports revenue inflation FY21-25

What SEBI’s interim order says

The Securities and Exchange Board of India (SEBI) has issued an interim ex-parte order against Rajesh Exports Ltd (REL) and restrained its promoter and Executive Chairman, Rajesh Mehta, from buying, selling, or dealing in the company’s shares until further orders. The regulator’s findings, set out in a 109-page interim order, focus on alleged misrepresentation of financials, gaps in disclosure, and transactions routed through promoter-linked accounts and entities. SEBI has also directed Rajesh Exports to cooperate with the investigating officer and forensic auditors, after noting that the earlier forensic exercise could not be completed satisfactorily.

The interim order does not conclude the investigation but records SEBI’s prima facie observations for the period starting FY21 through FY25. SEBI said its initial investigation indicated the company may have manipulated its books of accounts, particularly consolidated revenues linked to overseas subsidiaries. It also raised concerns around investor-facing financial statements, including the presentation of trade receivables, trade payables, and the company’s overall financial position.

Revenue concentration in overseas subsidiaries under scrutiny

A central theme of SEBI’s order is the composition of Rajesh Exports’ consolidated revenue. According to SEBI, about 97% to 99% of the company’s consolidated revenue was attributed to overseas subsidiaries and step-down subsidiaries. The regulator said it questioned whether revenues of that scale were backed by verifiable records, especially after repeated summons.

SEBI alleged that the company did not provide verifiable records to support such large subsidiary-linked revenue. The order described the apparent inflation as “egregious and unheard of” in the context of the information available to investigators and auditors. SEBI’s interim view is that this disclosure pattern may have presented investors with a misleading picture of the company’s operating scale.

Alleged misrepresentation quantified: FY21 to FY25

SEBI has alleged that Rajesh Exports prima facie misrepresented around ₹1,515,385 crore of subsidiary-linked revenue between FY21 and FY25. SEBI stated that this represented 99.80% of the revenue attributed to subsidiaries during the period under review.

Separate reporting of the case also described the alleged misrepresentation as roughly ₹1,515,000 crore across five financial years. While SEBI’s order is interim, the regulator’s quantified allegation is the anchor for the current market and governance scrutiny around the company’s reported turnover.

Subsidiary financial statements and disclosure gaps

SEBI alleged that Rajesh Exports did not properly place the financial statements of its subsidiaries and step-down subsidiaries in the public domain. This is significant because the regulator’s concern is not limited to the size of consolidated revenue, but also the visibility and audit trail of the entities said to be generating that revenue.

The regulator’s order highlights the importance of investors being able to assess material subsidiaries through adequate disclosures. In this case, SEBI has linked the alleged disclosure gaps to the broader question of whether reported consolidated revenue had sufficient documentary backing.

Valcambi and questions on audited versus consolidated numbers

SEBI’s interim order also discusses Switzerland-based Valcambi SA, which was cited as a key overseas entity. According to the material cited, SEBI alleged that inflated unaudited revenue shown at the consolidated level was not supported by Valcambi’s audited standalone financial statements, underlying transaction records, or the accounting logic described in the order.

The regulator’s concern, as recorded, is that the consolidated claims were not reconcilable with the audited standalone picture available from key overseas operations. This mismatch forms part of SEBI’s broader allegation that the company’s revenue scale was inflated through overseas entities without adequate supporting documentation.

Promoter-linked routing of company funds

SEBI alleged that company funds were routed through personal accounts of promoter Rajesh Mehta and Siddharth Mehta, and through a promoter-linked entity, Elest. The interim order and related coverage list gross transfers flagged by SEBI that add up to around ₹926 crore.

The regulator also alleged that such movements occurred without adequate approvals or disclosures in the manner expected for related-party matters. These observations feed into SEBI’s wider allegations around corporate governance and the integrity of investor disclosures.

Affluence Shares transactions and related-party disclosure concerns

SEBI’s interim order also highlighted transactions involving Affluence Shares and Stocks Private Limited. As reported, the company recorded ₹11,487 crore in sales and ₹11,488 crore in purchases with the entity. However, Affluence denied any such transactions, according to the cited report.

The regulator alleged these were non-genuine entries linked to promoter derivative trades, and that they were used to inflate turnover without real economic activity. In addition, the issue has been framed as a related-party disclosure concern, with the regulator alleging that the transactions were not disclosed as related-party transactions and were connected to promoter trading activity.

Cooperation issues and the fresh forensic audit

SEBI stated that Rajesh Exports did not fully cooperate with the regulator and forensic auditors when asked to produce records and information. Another report cited that the company took shelter under the Swiss Federal Act on data protection in relation to certain overseas subsidiary data, which restricted access to primary records during forensic review.

SEBI has ordered a fresh forensic audit, noting that the earlier audit could not be completed satisfactorily. The company has also been directed to provide pending information sought by investigators within 30 days, as cited in related reporting.

Action on auditor oversight and the role of governance

Beyond immediate restraints and directions, SEBI has forwarded a copy of its order to the National Financial Reporting Authority (NFRA) for “appropriate actions, if any” against the statutory auditors named in the coverage, BSD & Co. This step signals that the regulator’s concerns extend to oversight and audit quality in the context of the alleged financial reporting issues.

SEBI’s order also records that Rajesh Mehta attended every board meeting and audit committee meeting during the relevant period, and that statements recorded in the investigation suggested key decisions involving overseas subsidiaries and receivable adjustments were handled by him. On that basis, SEBI concluded prima facie that the acts under scrutiny could not have occurred without his knowledge, involvement, or acquiescence.

Company response and what happens next

Rajesh Exports has dismissed SEBI’s allegations, stating that the order is interim and that the revenues declared by the company are correct. Separately, Rajesh Mehta has responded on NDTV Profit on questions linked to issues highlighted in SEBI’s interim order.

For investors, the immediate next milestones are tied to the ongoing investigation, completion of the fresh forensic audit, and any subsequent regulatory actions based on findings. SEBI’s interim restraint on the promoter remains in place until further orders, and the company has been directed to cooperate and provide information sought by investigators.

Key numbers from SEBI’s interim findings