The ₹15.15 lakh crore puzzle: SEBI's stunning findings on Rajesh Exports

On paper, Rajesh Exports Ltd was a giant. Between FY21 and FY25, the Bengaluru-based gold refiner reported revenues of more than ₹15 lakh crore.

But when the Securities and Exchange Board of India (SEBI) started digging into the company’s claims, it found that Rajesh Exports may have misrepresented nearly ₹15.15 lakh crore of revenue in its consolidated financial statements over five years.

SEBI said its examination of the company's consolidated accounts revealed "serious concerns regarding the authenticity and verifiability" of revenues attributed to foreign subsidiaries and step-down subsidiaries.

In a 109-page interim order, the market regulator said prima facie findings indicated that REL “appear to have materially overstated and misrepresented the operational scale and financial performance” of the group during FY21-FY25.

What does Rajesh Exports do?

Rajesh Exports is a Bengaluru-based gold refiner and jewellery manufacturer whose shares are listed on the NSE and BSE.

The company operates through a network of subsidiaries, including Switzerland-based precious metals refiner Valcambi SA, Singapore-based REL Singapore, Global Gold Refineries AG (GGR), and other overseas entities.

What triggered the SEBI probe?

SEBI's investigation was initiated following a shareholder complaint in March 2024 alleging “potential financial misrepresentation in the books of REL with respect to large sum of trade receivables outstanding for more than two years.”

The regulator subsequently launched a detailed investigation and appointed forensic auditor BDO India Services Pvt Ltd to examine the company's accounts and disclosures.

According to the order, REL reported consolidated revenue of about ₹15.45 lakh crore during FY21-FY25.

However, its standalone Indian business generated only about ₹26,500 crore during the same period.

SEBI noted that over 97% of REL's consolidated revenue was attributed to overseas subsidiaries and step-down subsidiaries.

SEBI's comparison with audited standalone financial statements of Valcambi SA -- which REL described as the principal operating entity of the group -- showed revenue of only around ₹3,027 crore during the relevant period.

"As per the material available on record, REL has prima facie misrepresented approximately ₹15,15,385 crore, representing 99.80 per cent of its revenues attributed to subsidiaries during FY21-FY25," the order said.

The regulator says it repeatedly sought transaction-level records, customer details, vendor information and supporting documents to verify these revenues but did not receive adequate information.

“The failure of REL to furnish transaction-level records, customer details, vendor confirmations, invoices, inventory trails, or other primary evidentiary material, coupled with the negligible standalone revenues disclosed by only overseas operating entity and the absence of demonstrable substantive operations by others, renders the consolidated revenue figures of REL commercially implausible,” SEBI said, raising doubt on the genuineness of the disclosures in the financial statements.

Valcambi SA, Global Gold Refineries in spotlight

Rajesh Exports repeatedly described Switzerland-based Valcambi SA as the principal operating entity of the group, stating that REL Singapore, GGR and ACC Energy had no substantive business operations.

However, SEBI found that Valcambi's audited standalone revenues were only a tiny fraction of the revenues reported in Rajesh Exports' consolidated accounts.

In the calendar year 2023, Valcambi's audited revenue was about ₹543 crore.

On the other hand, Global Gold Refineries AG reported revenues of around ₹2.93 lakh crore, while Rajesh Exports reported consolidated revenues of about ₹2.81 lakh crore.

The regulator questioned how a holding company with no substantive operating activity could report revenues vastly exceeding those of the operating entity beneath it.

According to SEBI, the unaudited figures reported by GGR formed the basis of Rajesh Exports' consolidated financial statements.

"It is pertinent to note that despite repeated summons and opportunities granted by SEBI, REL failed to furnish party-wise sales details, invoices, purchase records, confirmations, customer details or vendor details in respect of the alleged overseas revenues,” the order said.

SEBI also said the company did not upload financial statements of several subsidiaries on its website despite legal requirements.

SEBI further noted that a forensic audit conducted by BDO India Services Pvt Ltd faced severe limitations because of alleged non-cooperation by the company.

According to the forensic auditor, REL did not provide access to its ERP systems, books of accounts and journal dumps, while information relating to foreign subsidiaries was withheld on the grounds of Swiss data protection laws.

SEBI said that REL submitted copies of the Swiss Federal Act on Data Protection and a sample confidentiality agreement, asserting that these statutes prohibit the cross-border transfer of "personal data" to India.

"I have examined the provisions of the FADP and find REL’s reliance on the same to be misplaced," the order said.

The order also highlighted the company's failure to upload audited financial statements of several subsidiaries and step-down subsidiaries despite statutory requirements under the Companies Act and SEBI's listing regulations.

The regulator identified multiple discrepancies across different sets of sales data submitted by REL, including mismatches in customer-wise sales figures and instances where certain customers appeared in one submission but were absent in another.

SEBI said the cumulative effect of the omissions created a “severe information asymmetry” for investors and raised serious doubts about the authenticity of the consolidated financial statements.

Personal trading using company’s funds

SEBI also alleged that Rajesh Exports recorded nearly ₹11,500 crore of sales and purchases in the name of a stockbroker.

The broker, however, told the regulator it had never dealt with the company and only maintained a personal trading relationship with promoter Rajesh Mehta.

According to the order, the company transferred ₹7.45 crore into Mehta’s personal accounts, which he utilised for trading in his personal account and transferred back ₹3.4 crore to the company.

The transaction was neither approved by the board, nor intimated to exchanges and investors as related party transactions.

Pending completion of investigation, the regulator has restrained REL and Rajesh Mehta from buying, selling or otherwise dealing in securities, directly or indirectly.

The order held that Mehta was the key decision-making authority within REL and exercised substantial control over the day-to-day affairs and financial operations of the company and its subsidiaries.

SEBI also directed REL and Mehta to cooperate with the investigating authority and furnish all the documents and explanations sought within 30 days.

The company and its promoter have also been directed not to dispose of or alienate any assets without prior permission from SEBI, except for transactions undertaken in the ordinary course of business.

Rajesh Exports response

Rajesh Exports clarified on Thursday that "the order is interim, and there has been no adverse conclusion on any aspect arrived at by SEBI."

The company added that “revenues declared by the company are correct, and there is no overstatement of revenues. There seems to be some type of communication gap and confusion between SEBI and the company. The company is in the process of clarifying all aspects to SEBI by submitting all the required and relevant documents."