In a development that could rank among the most significant corporate governance cases in India's capital markets, the Securities and Exchange Board of India (SEBI) has accused Rajesh Exports Ltd (REL) of misrepresenting revenues worth approximately ₹15.15 lakh crore over a five-year period between FY21 and FY25.

The allegations form part of a 109-page interim ex-parte order issued by the market regulator, which has imposed restrictions on the company and its promoter-chairman Rajesh Mehta while directing a fresh forensic audit into the company's financial records and disclosures.

At the heart of the investigation is SEBI's finding that nearly 99.8% of the consolidated revenues reported by the company's subsidiaries during the period under review could not be independently verified. According to the regulator, the reported figures may have significantly overstated the group's actual scale of operations and financial performance, potentially misleading investors and market participants.

The alleged discrepancy amounts to approximately ₹15.15 lakh crore, or nearly $159 billion, making it one of the largest revenue misstatement allegations ever examined by India's securities regulator.

Focus on Overseas Subsidiaries

A major portion of SEBI's investigation centres on Switzerland-based Valcambi SA, a precious metals refining company acquired by Rajesh Exports in 2015.

The regulator has questioned the revenue figures attributed to overseas subsidiaries, particularly Valcambi, after identifying significant differences between revenues reflected in the group's consolidated accounts and those available in the subsidiary's standalone financial statements. According to SEBI, substantial portions of the reported revenue lacked adequate supporting documentation and could not be independently validated during the investigation.

Rajesh Exports has strongly denied any wrongdoing, maintaining that its financial disclosures are accurate and that the regulator's concerns stem from differences in the interpretation of revenues generated through its international operations.

Questions Over Documentation and Transactions

SEBI's probe began after complaints raised concerns over unusually large and long-outstanding trade receivables reflected in the company's financial statements.

As part of the investigation, the regulator sought customer-wise sales records, vendor details, subsidiary accounts, transaction-level information, accounting records, and access to enterprise systems. However, SEBI stated that several requests were either only partially complied with or remained unanswered.

The forensic review reportedly encountered difficulties in obtaining access to key accounting records, enterprise resource planning systems, journal entries, and supporting documents. For transaction samples worth more than ₹7,000 crore, investigators were reportedly able to obtain complete supporting records for only a limited number of transactions.

The regulator has also raised concerns regarding transactions involving Affluence Shares and Stocks Private Limited. Sales and purchase entries exceeding ₹11,400 crore each were flagged after questions emerged regarding the nature and documentation of those transactions.

According to the interim findings, some transactions may have involved personal derivative trading activities that were allegedly recorded as corporate sales and purchases, though the matter remains under investigation.

Allegations of Fund Routing

SEBI's order further highlights concerns regarding the movement of company funds.

The regulator has alleged that approximately ₹339 crore may have been routed into personal derivative trading accounts linked to the promoter without obtaining approvals from the board of directors or the audit committee. Questions have also been raised regarding certain accounting treatments, including the classification of foreign exchange gains and interest income.

Additionally, investigators have sought clarity on investments linked to African gold mining assets after encountering difficulties in verifying supporting records associated with those transactions.

The regulator has stated that these findings require deeper examination and form part of the rationale behind the decision to conduct a fresh forensic audit.

Market Impact and Investor Concerns

The allegations triggered a sharp reaction in the stock market, with Rajesh Exports shares coming under pressure following the publication of SEBI's order.

The case has also renewed scrutiny of institutional ownership in the company. Shareholding data shows that domestic mutual funds gradually reduced their exposure to Rajesh Exports over the past decade, eventually exiting the stock altogether. In contrast, the Life Insurance Corporation of India (LIC) steadily increased its stake and currently holds around 11% of the company, making it one of the largest institutional shareholders.

The developments have intensified discussions around corporate disclosures, audit quality, and investor due diligence, particularly in companies with significant overseas operations and complex subsidiary structures.

Company Rejects Allegations

Rajesh Exports has rejected the regulator's findings and stated that its financial reporting complies with applicable accounting standards and disclosure requirements.

The company has argued that the issues highlighted in the interim order arise from misunderstandings relating to the treatment and reporting of revenues generated by overseas subsidiaries. It has also stated that it will continue cooperating with authorities and present its response during the ongoing proceedings.

Importantly, SEBI's order is interim in nature and does not constitute a final determination of wrongdoing. The company and its promoter will have the opportunity to submit explanations and challenge the regulator's findings before any final action is taken.

Wider Regulatory Implications

Beyond the securities market investigation, the case could attract attention from other regulatory authorities examining corporate governance and compliance issues.

The controversy has also raised questions about the effectiveness of disclosure mechanisms, audit processes, and oversight standards in listed companies. Market observers believe the outcome of the case could have significant implications for how regulators assess revenues reported through overseas subsidiaries and complex international business structures.

As the fresh forensic audit proceeds and the investigation continues, the Rajesh Exports case is expected to remain one of the most closely watched corporate governance developments in India. The findings could shape future discussions on transparency, accountability, and financial reporting standards in the country's capital markets.

With inputs from agencies

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