The Swiss Vault: SEBI's theory on how a Rs 15 lakh crore revenue puzzle was built at Rajesh Exports - Moneycontrol.com
SEBI suspects that inflated revenue recognition, opaque overseas reporting, incomplete disclosures, and unusual fund flows may have combined to create a financial picture that looked
SEBI suspects that inflated revenue recognition, opaque overseas reporting, incomplete disclosures, and unusual fund flows may have combined to create a financial picture that looked far larger and healthier than what the underlying records could support. What Next for Rajesh Exports? SEBI's Interim Order Opens Multiple issues and Fronts SEBI questions Rajesh Exports’ overseas revenue claims Regulator finds Rs 15.15 lakh crore revenue gap over five years Swiss secrecy cited; SEBI flags inadequate disclosures Did our AI summary help? RE07 RE07 NSE/BSE Select NSE LIVE BSE LIVE Day High Day Low Volume (NSE) More × For years, investors looking at Rajesh Exports saw what appeared to be one of India's largest corporate success stories. The company reported consolidated revenues running into lakhs of crores, rivalling some of the biggest businesses in the country. But according to market regulator Securities and Exchange Board of India's (SEBI's) interim order, beneath those staggering numbers lay a mystery that regulators struggled to unravel. In March 2024, SEBI received a complaint in which a shareholder of Rajesh Exports Limited alleged potential financial misrepresentation in REL's books regarding a large sum of trade receivables outstanding for more than two years. This led to an SEBI investigation. At the heart of the story was a web of overseas entities, particularly Swiss-based subsidiaries. SEBI says that between FY2020-21 and FY2024-25, nearly 97-99 percent of the group's reported revenue came not from the Indian listed company but from overseas subsidiaries. On paper, these foreign entities appeared to be the engine powering a massive global gold business. Yet when SEBI examined the underlying disclosures, it said it found what it viewed as a significant discrepancy.
The audited standalone accounts of Valcambi SA, the Swiss refinery repeatedly described as a key operating entity of the group, showed revenues that were only a tiny fraction of the numbers being reported at the consolidated level. To SEBI, the gap was too large to ignore. SEBI found that Valcambi SA's audited standalone revenue for CY2023 was Rs 542.68 crore, while GGR reported consolidated revenue of Rs 2.93 lakh crore and Rajesh Exports reported consolidated revenue of Rs 2.81 lakh crore. SEBI questioned the basis for this gap and stated, at the interim stage, the company's explanation that the difference arose because Valcambi reported only processing income while GGR recognized gross gold transaction values. SEBI is not convinced by the company's explanation as it was not supported by sufficient documentary evidence. SEBI Whole-Time Member Kamlesh Chandra Varshney, in the interim order, raised fundamental questions regarding the company's arguments. He noted, “It is not clear as to how the consolidating entity changes fundamental of accounting by including the market value of goods belonging to third party as its revenue, when the operating entity itself accounts for only value addition (as it does not claim to take ownership of goods belonging to someone else)”. Also read: SEBI flags Rs 15.15 lakh crore revenue misstatement in 5 Years, Interim order against Rajesh Exports The regulator's view is that revenues may have been recorded on a gross basis, counting the full value of gold transactions, rather than recognizing only the refining or processing income actually earned. If correct, that accounting treatment could dramatically magnify reported turnover without a corresponding increase in real economic activity.
SEBI's preliminary estimate suggests that as much as Rs 15.15 lakh crore of revenue attributed to subsidiaries may not have been adequately supported by underlying records. But the numbers themselves were only part of the puzzle. In a press release issued, Thurday evening, Rajesh Exports stated that its revenue figures are correct and there is a communication gap between SEBI and the company. Release stated, "The core observation in the order is with regard to the mis-reporting of the revenues, this has emerged primarily due to confusion because SEBI has considered the EBIDTA of Valcambi instead of Revenue hence it has stated that there is difference of about 97% in the revenue. The consolidated Revenue as stated by the Company is correct". As SEBI sought customer lists, invoices, accounting ledgers, subsidiary financial statements, and transaction records, it says it repeatedly hit a wall. The company often pointed to Swiss confidentiality obligations and legal restrictions governing the disclosure of information. From the company's perspective, those restrictions limited what could be shared. From SEBI's perspective, the restrictions were for natural persons and not corporate entities. The regulator's position was straightforward: if foreign subsidiaries generated almost all of the group's revenue, then sufficient evidence should have existed to substantiate those revenues. Instead, the SEBI investigation allegedly found itself chasing documents that either arrived incomplete, arrived late, or did not arrive at all. What emerged, according to SEBI, was a financial structure that appeared transparent to investors but remained frustratingly opaque to regulators. The story became even more intriguing when investigators examined certain transactions closer to home. SEBI highlighted massive sales and purchases involving Affluence Shares and Stocks, where purchases and sales were almost identical in value.
To the regulator, these transactions appeared to create enormous turnover while generating little apparent value addition. Also read: From NSE Shares to Courtrooms: FIR Against Relative of Veteran Investment Banker Sparks Legal Battle The order is at an interim stage, and based on a new forensic audit, SEBI will examine whether a vast international structure, shielded in part by foreign confidentiality laws and supported by incomplete documentation, was used to construct an illusion of scale that investors could see but regulators could not fully verify. Whether that suspicion ultimately withstands legal scrutiny remains to be determined, but it is this gap between reported and verifiable evidence that lies at the centre of one of the regulator's most consequential investigations. Also read: IndusInd Bank insider trading probe: SEBI conducts Kolkata searches; e official under scanner The regulator stops short of making final conclusions at this stage. The order is only an interim finding, and the company will have the opportunity to challenge every allegation. Nevertheless, SEBI's narrative is clear. It suspects that inflated revenue recognition, opaque overseas reporting, incomplete disclosures, and unusual fund flows may have combined to create a financial picture that looked far larger and healthier than what the underlying records could support. However, Rajesh Exports Chairman and Managing Director, Rajesh Mehta, denied the SEBI's allegations. "It is an interim order and nothing in it is true," Rajesh Mehta, chairman and managing director at Rajesh Exports, told Moneycontrol on June 4 morning.
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