SEBI action on Rajesh Exports: SEBI has taken major action against the promoter of Rajesh Exports. He has been accused of financial irregularities. His trading on the stock market has been banned.

Rajesh Exports promoter accused of financial irregularities

Rajesh Export Shares: Market regulator SEBI has taken strong action against Rajesh Export, a gold and jewelry company, and its promoter, Rajesh Mehta. Consequently, the company's shares hit a 5% lower circuit on Thursday, June 4th.

The stock fell from ₹103.92 to ₹104.65 on the BSE and NSE. This decline in the company's shares came after SEBI accused the company's promoter and chairman, Rajesh Mehta, of serious financial irregularities and barred him from trading on the stock exchanges.

What is the allegation?

According to SEBI's interim order, the company inflated its consolidated revenue by approximately ₹15.35 lakh crore between the financial years 2021 and 2025. Of this, ₹15.15 lakh crore, or approximately 98.7%, was found to be completely fraudulent. The actual revenue was ₹20,111 crore. SEBI's investigation has revealed several other serious issues.

Fake companies were created on the company's records. Rajesh Exports purchased goods and sold them to Khul. This in turn led to inflated revenue by selling goods to its own companies. In its standalone books, the company recorded sales of approximately ₹11,487 crore and purchases of approximately ₹11,488 crore between FY22 and FY24 through a unit called 'Affluence'. This represented a significant portion of the company's total turnover.

When SEBI investigated, Affluence stated clearly that Rajesh Exports was never its client and that it had no corporate dealings with them. Affluence revealed that it dealt only with Rajesh Mehta on a personal level. The investigation found that company funds were transferred to the promoter's personal bank accounts without the approval of the board or audit committee, violating regulations.

According to stock market regulations, the funds of a publicly listed company belong to the shareholders. Promoters cannot route the company's cash into their private accounts as short- or long-term loans without proper disclosure or approval. Such "back-and-forth transactions" are often used to conceal financial fraud.

How was it revealed?

SEBI initiated its investigation against the company based on a complaint received from a shareholder in March 2024. The shareholder's complaint primarily raised the issue of a large sum of money remaining in Rajesh Exports' books as 'Trade Receivables' for years.

When SEBI examined the company's initial data based on this complaint, it discovered some discrepancies. The company consistently reported high turnover, but its cash flow and bank balances were inconsistent. SEBI formed an investigation team to investigate. An auditor was also appointed to conduct a forensic audit of the case.

Impact on the stock market and investors

Following these allegations by SEBI, investors' concerns about the future of Rajesh Exports have increased. The country's largest insurance company, Life Insurance Corporation of India (LIC), also has stakes in the company. LIC holds a 10.8% stake in the company until March 2026. This has dealt a significant blow to institutional investors. The stock has fallen nearly 90% from its all-time high.