Security and Exchange Board of India
Indian stock market regulator SEBI, taking major action against jewelery company Rajesh Exports Limited, has imposed an interim ban on the promoters including its Chairman Rajesh Mehta. In a 109-page order, SEBI has alleged that the company misreported revenue of about Rs 15.15 lakh crore between financial years 2021 to 2025. The investigation revealed irregularities in the business, sales figures and financial disclosures of foreign subsidiaries.
According to the regulator, about 99.8 percent of the company’s total reported revenue during financial years 2021 to 2025 may have been misreported. This amount comes to approximately Rs 15.15 lakh crore. This investigation by SEBI was started in March 2024 after a complaint made by a shareholder. The complaint pointed to large trade receivables and possible financial irregularities shown in the company’s balance sheet. After this the regulator started a detailed investigation of the company’s financial documents and business structure.
The whole story hinged on foreign subsidiaries
According to the SEBI order, Rajesh Exports had claimed that 97 to 99 per cent of its consolidated revenue came from foreign subsidiaries and step-down subsidiaries. Among these, Switzerland-based Valcambi SA was said to be the main operating unit of the group. However, during investigation, SEBI found a huge difference between the consolidated revenues of the company and the independently audited accounts of Valcambi SA. According to the regulator, Valcambi’s independent revenue was less than 0.5 per cent of the consolidated revenue, which was said to be the group’s main business activity.
The company kept avoiding giving information
SEBI alleged that the company did not provide party-wise data related to sales, purchases, debtors, creditors and inventory during the investigation. The company cited Swiss data protection laws and confidentiality agreements behind this. But SEBI rejected this argument and said that foreign confidentiality rules cannot become a basis for avoiding disclosures required under Indian securities laws. The regulator clearly said that any company listed in the Indian market will have to follow the rules related to transparency.
During the investigation, several contradictions were also found in the customer-wise sales data submitted by the company. Some customers were present in one record but did not appear in the other record. At the same time, sales figures were also found to be different in different filings for the same customer. SEBI believes that these discrepancies raise serious questions on the credibility of financial reporting.
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