What started as a single shareholder complaint has evolved into one of the largest corporate governance investigations in India's capital markets, with the Securities and Exchange Board of India (Sebi) scrutinizing alleged revenue discrepancies worth over Rs 15 lakh crore at Rajesh Exports Ltd (REL).

Key Highlights

• A shareholder complaint triggered Sebi's investigation into Rajesh Exports' accounting and disclosures.
• Sebi alleges potential revenue misrepresentation of nearly Rs 15.15 lakh crore across subsidiaries.

The investigation began on March 11, 2024, when Sebi received an email from a shareholder raising concerns about large trade receivables that had remained outstanding on the company's books for an extended period. Initially focused on the receivables issue, the regulator's inquiry soon expanded into a wider examination of the gold exporter's accounting practices, subsidiary operations, and financial disclosures.

Shareholder Complaint Triggers Wider Investigation

As part of its review, Sebi sought extensive information from Rajesh Exports, including customer-wise sales records, vendor details, debtor and creditor data, subsidiary financial statements, transaction documentation, and access to accounting systems.

According to Sebi's interim findings, several requests were either partially addressed or remained unanswered. A forensic auditor appointed by the regulator reportedly faced challenges in accessing critical records, including enterprise resource planning (ERP) systems, accounting books, journal entries, and supporting transaction documents.

The auditor observed that a significant number of sampled transactions could not be independently verified due to incomplete documentation. Among transactions exceeding Rs 7,000 crore selected for review, only a limited portion was supported by complete records, prompting Sebi to broaden its investigation beyond receivables and examine the company's overall financial reporting framework.

Focus Turns to Overseas Subsidiaries

A major area of concern for Sebi involves Rajesh Exports' international subsidiary structure. The company wholly owns REL Singapore, which controls Switzerland-based Global Gold Refineries AG (GGR). GGR, in turn, owns Valcambi SA, one of the world's largest gold refineries and the group's primary operating asset.

Between FY21 and FY25, Rajesh Exports reported consolidated revenues of approximately Rs 15.45 lakh crore, with nearly Rs 15.18 lakh crore attributed to its overseas subsidiaries and step-down entities.

However, Sebi's analysis raised questions about the consistency of these disclosures. According to the regulator, audited standalone financial statements of Valcambi SA showed annual revenues ranging from approximately Rs 427 crore to Rs 743 crore during the same period, significantly lower than the multi-trillion-rupee revenues reported at the group level.

Rajesh Exports argued that Valcambi's standalone accounts reflected only processing and value-addition income, while GGR recorded the gross value of gold transactions. Sebi, however, stated that the company failed to provide sufficient reconciliation statements, accounting opinions, ownership records, and transaction-level evidence to validate the reported treatment.

Based on its preliminary assessment, the regulator has alleged that nearly Rs 15.15 lakh crore of revenue attributed to subsidiaries between FY21 and FY25 may have been misrepresented.

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Company Rejects Allegations

Rajesh Exports has strongly disputed Sebi's observations, maintaining that information regarding its subsidiaries was adequately disclosed through consolidated financial statements. The company also cited Swiss confidentiality and data-protection regulations as reasons for not sharing certain overseas operational details.

Sebi rejected these explanations, stating that foreign confidentiality laws do not exempt listed Indian companies from complying with domestic regulatory requirements and disclosure obligations.

The case has attracted significant attention due to its scale and the presence of major institutional investors. Notably, Life Insurance Corporation of India (LIC) holds approximately 10.8% of Rajesh Exports, making it one of the company's largest shareholders.

One of India's Most Closely Watched Corporate Governance Cases

With allegations involving potential revenue misrepresentation, disclosure deficiencies, and difficulties in verifying international transactions, the Rajesh Exports investigation has emerged as one of the most significant accounting and governance probes in recent years.

As Sebi continues its forensic review, market participants will be closely monitoring the outcome, which could have far-reaching implications for corporate disclosures, cross-border subsidiary reporting, and investor confidence in India's listed companies.