SEBI Bars Rajesh Exports and Chairman Rajesh Mehta Over Alleged Rs 15.15 Lakh Crore Revenue Fraud

Top Summary

• What happened: SEBI has barred gold giant Rajesh Exports and its promoter Rajesh Mehta from the market over an alleged Rs 15.15 lakh crore revenue mismatch.
• Why it matters: This is one of the largest corporate revenue misrepresentation probes in India, involving nearly the company's entire reported consolidated sales.
• What changes: Investors face massive wealth erosion, prompting major lenders to auction the firm's stressed debt to recover outstanding loans.
• Who is affected: Promoter Rajesh Mehta, shareholders, the state-owned LIC (holding a 10.8% stake), and lender Canara Bank are directly impacted.

Forensic Probe Uncovers Massive Discrepancies

Bengaluru-based gold refiner Rajesh Exports is under intensive scrutiny after the capital markets regulator, SEBI, stepped in. On June 3, SEBI issued an interim order barring the company and its promoter-chairman, Rajesh Mehta, from entering the securities market.

The investigation was kicked off by a shareholder complaint on March 11, 2024, which flagged trade receivables outstanding for over two years. SEBI subsequently appointed an investigating authority in October 2024 and brought in forensic auditor BDO to examine the books.

The Rs 15.15 Lakh Crore Revenue Mismatch

Auditors discovered that between FY21 and FY25, overseas subsidiaries like Switzerland's Valcambi SA contributed 97% to 99% of the group's consolidated revenues. However, these reported revenues did not match actual subsidiary books.

The cumulative difference reached a staggering Rs 15.15 lakh crore, which represents almost all of the group's reported consolidated sales. The forensic audit hit roadblocks as the management failed to provide key documents, including customer records and financial statements of material subsidiaries.

Unapproved Transfers and Fabricated Deals

Beyond the revenue gaps, several major red flags were noted by the regulator:

• The company failed to provide valuation or ownership papers for a reported Rs 1,035 crore investment in African gold mining assets.
• Transactions totaling Rs 11,487 crore in sales and Rs 11,488 crore in purchases were recorded with Affluence Shares and Stocks, but the firm denied having Rajesh Exports as a client.
• About Rs 7.4 crore of company funds was moved to Mehta’s personal account for personal derivative trades without board approval.

Market Crash and Financial Crisis

The fallout has severely hit retail and institutional investors. The state-owned Life Insurance Corporation of India (LIC) holds a 10.8% stake in the company, putting policyholder premiums at risk. SEBI estimates total shareholder wealth erosion from the alleged misconduct could be as high as Rs 12,726 crore.

The company’s stock plunged by its 5% lower circuit limit following the order, and has lost more than 80% of its value over the past three years. Meanwhile, Canara Bank has classified its Rs 509 crore exposure as a stressed asset and is taking steps to auction the debt.

"Rajesh Exports offers a lesson on the shortfall of certain metrics... Allegations of massive revenue fraud, coupled with the SEBI's regulatory action, and insolvency issues, necessitate a broader analysis of governance, liquidity, the quality of cash, auditor comments, and the level of transparency." - Siddharth Maurya, Founder of Vibhavangal Anukulakara Private Limited.

What to Watch Next

As this is an interim order, Rajesh Exports and Rajesh Mehta have the right to submit their formal defense and contest SEBI's findings. Future developments will hinge on the forensic team's final report and Canara Bank's upcoming auction of its Rs 509 crore stressed exposure.