A day after SEBI alleged large-scale misrepresentation of financial statements and diversion of funds in Rajesh Exports Ltd and barred its promoter and CEO Rajesh Mehta from dealing in the company’s securities, the gems and jewellery firm on Thursday, June 4, denied any financial irregularities. In a BSE filing, the company stated that its reported revenues were “correct” and claimed that there seemed to be a communication gap between the markets regulator and the firm.
“The revenues declared by the company are correct, and there is no over-stating of revenues. There seems to be some type of communication gap and confusion between Sebi and the company,” Rajesh Exports said.
It added, “The company is in the process of clarifying all aspects to SEBI by submitting all the required and relevant documents… The company is confident that SEBI in its wisdom will clarify the situation and arrive at the correct conclusion based on the authenticated documents which are in the process of submission by the company.”
SEBI alleges ₹15.15 lakh crore revenue misrepresentation
The capital markets regulator had on Wednesday, June 3, barred Rajesh Mehta from dealing in the company’s securities, besides asking the company to make true disclosures of their financial statements.
In its 109-page interim order, Sebi stated that its investigation revealed misrepresentation in financial statements along with instances of routing and layering of funds through personal accounts and related entities. This was done without adequate disclosures or supporting documentation, it added.
SEBI Whole Time Member Kamlesh Chandra Varshney mentioned in the order that they prima facie found evidence of a multi-year pattern, which involved non-genuine transactions, improper accounting practices, diversion of company funds via promoter-linked entities and inadequate disclosures to investors, IANS reported.
As per reports, SEBI alleged that Rajesh Exports misrepresented consolidated revenues aggregating about ₹15.15 lakh crore between FY2020-21 and FY2024-25. This, it said, accounts for nearly 99.8 per cent of the company’s total reported consolidated revenue during the period.
“I prima facie find that the pattern of routing substantial sums through the personal bank accounts of Mr. Rajesh Mehta and Siddharth Mehta, coupled with absence of approvals, non-disclosure and inconsistent explanations, demonstrates systemic failure of corporate governance, concealment of material information and deliberate circumvention of regulatory requirements,” Varshney said in SEBI order.
The markets watchdog further claimed that the firm was issued repeated summons and given several opportunities to furnish true and fair financial statements. Besides this, it has flagged non-cooperation by REL’s statutory auditors.
The interim order came after SEBI got a complaint on March 11, 2024 from an REL shareholder alleging potential financial misrepresentation in the books with respect to a large sum of trade receivables outstanding for more than two years, PTI reported.
The present proceedings by SEBI have emanated from an investigation that was held for the period between April 1, 2020 to March 31, 2024.
Who is Rajesh Mehta?
Born on June 20, 1964, Mehta serves as the chairman of Rajesh Exports. He is among India’s most prominent entrepreneurs in the gold and jewellery industry.
As per reports, he completed his education at St. Joseph’s School in Bengaluru and decided not to pursue higher education and rather joined his father’s jewellery business at a young age.
During early 1980s – a time when the jewellery trade in the country was largely unorganised – Mehta and his brother Prashant are believed to have borrowed ₹1,200 from their eldest brother to build a silver jewellery business, The Economic Times reported.
Later on, their venture became one of the leading wholesale silver jewellery businesses in south India. They marked a big milestone in 1995 when Rajesh Exports entered the capital markets with its IPO and raised ₹10 crore.
Post that, the firm expanded operations across the gold value chain.