SEBI Restrains Rajesh Exports, Chairman Mehta Over Financial Misstatements
Market regulator SEBI has taken action against Rajesh Exports and its Chairman Rajesh Mehta. The company faces allegations of significant financial misstatements and fund diversion. SEBI's order points to a pattern of non-genuine transactions and questionable accounting. This action raises serious concerns about the company's financial reporting and corporate governance practices.
Market regulator SEBI on Wednesday issued an interim ex-parte order against Rajesh Exports Ltd (REL) and its Chairman and Managing Director Rajesh Mehta, alleging large-scale financial misstatements, fund diversion through promoter-linked entities, and serious lapses in corporate governance.
In its 109-page order, SEBI Whole Time Member Kamlesh Chandra Varshney said the regulator had prima facie uncovered a multi-year pattern of non-genuine transactions, questionable accounting practices, inadequate disclosures and the routing of company funds through entities linked to the promoter group.
According to the regulator, Rajesh Exports allegedly misrepresented consolidated revenues of about Rs 15.15 lakh crore between FY21 and FY25. SEBI said these revenues accounted for nearly 99.8% of the company's total reported consolidated revenue during the period, raising concerns over the accuracy and reliability of its financial statements.
Who is Rajesh Mehta?
Born on June 20, 1964, in Bengaluru, Rajesh Mehta is the chairman of Rajesh Exports and one of India's most prominent entrepreneurs in the gold and jewellery industry. Educated at St. Joseph's School in Bengaluru, Mehta chose not to pursue higher education and instead joined his father's jewellery business at a young age.
In the early 1980s, when India's jewellery trade was largely unorganised, Mehta and his brother Prashant borrowed just Rs 1,200 from their eldest brother to start a silver jewellery business. The venture soon grew into one of the leading wholesale silver jewellery businesses in South India, as well as key markets such as Gujarat and Mumbai.
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A major milestone came in 1995 when Rajesh Exports entered the capital markets with an initial public offering (IPO), raising Rs 10 crore. Over the following decades, the company expanded its operations across the gold value chain, from refining and manufacturing to retailing.
In 2015, Rajesh Exports made global headlines by acquiring Swiss precious metals refinery Valcambi for $400 million in an all-cash deal. Valcambi is among the world's largest precious metals refiners and significantly strengthened the company's global footprint.
Mehta's net worth was estimated at $1.57 billion as of October 2019, showed Forbes' website.
What did SEBI say?
In a 109-page interim order on Wednesday, Sebi said its investigation has revealed misrepresentation in financial statements as well as instances of routing and layering of funds through personal accounts and related entities without adequate disclosures or supporting documentation.
The markets watchdog said the company was issued repeated summons and given several opportunities to furnish true and fair financial statements, complete records explaining the end-use, business rationale and ultimate beneficiaries of such fund flows, but there was no satisfactory response.
Sebi also flagged non-cooperation by REL's statutory auditors. According to the order, the auditors, during the deposition, promised to provide audit working papers, but eventually failed to do so.
The regulator said such sustained non-cooperation is itself indicative of an intent to suppress material information and obstruct regulatory inquiry.
Sebi further observed that among the aberrations prima facie noted in the matter, about 97-99 per cent of REL's revenue was inflated, are egregious and unheard of.
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.
Therefore, the regulator restrained Rajesh Mehta from buying, selling or dealing in securities of REL, either directly or indirectly, until further orders.
Shares of Life Insurance Corporation of India fell over 1% after Rajesh Exports witnessed a sharp 5% decline following Sebi's interim order against the company and its promoter, Rajesh Mehta. As per the latest shareholding data, LIC holds a 10.80% stake in the company.
