Rajesh Exports Ltd (REL), once celebrated as one of India's largest gold refiners and jewellery exporters, is now facing one of the most significant regulatory investigations in the country's corporate history.

The Securities and Exchange Board of India (SEBI) has alleged that the Bengaluru-based company misrepresented revenues worth ₹15.15 lakh crore between FY21 and FY25, accounting for nearly 99.8 per cent of the revenues attributed to its subsidiaries and step-down subsidiaries during the period.

The market regulator's findings, detailed in a 109-page interim order, have triggered fresh concerns about corporate governance, financial disclosures and transparency at one of India's most recognisable names in the gold business.

How a shareholder complaint triggered SEBI's investigation

The allegations stem from a detailed probe triggered by a shareholder complaint submitted to SEBI in March 2024.

The complaint raised concerns over unusually large trade receivables that had remained outstanding for more than two years, prompting the regulator to take a closer look at the company's books.

SEBI subsequently appointed an investigating authority and engaged forensic auditor BDO to examine Rajesh Exports' financial statements, subsidiary records and disclosures made to investors.

The regulator's scrutiny focused on the period between FY21 and FY25, during which the company reported massive consolidated revenues largely attributed to its overseas operations.

The investigation gained momentum as SEBI sought supporting documents, transaction records and financial information to verify the revenues disclosed by the company and its subsidiaries.

What SEBI found in its ₹15.15 lakh crore revenue probe

According to SEBI's interim order issued on June 3, nearly 97 to 99 per cent of Rajesh Exports' consolidated revenues during FY21-FY25 were attributed to overseas subsidiaries, particularly Switzerland-based Valcambi SA, which the company projected as its principal operating arm.

However, SEBI said revenues reflected in Valcambi's audited standalone accounts were only a fraction of the figures reported at the consolidated group level.

Based on its examination, the regulator alleged a discrepancy of ₹15.15 lakh crore over five years, a figure that could make the case one of the largest alleged revenue misrepresentation matters in India's corporate history if established.

The regulator also claimed that repeated requests for customer records, vendor details, invoices, transaction-level data and subsidiary financial statements were either inadequately addressed or not complied with.

According to SEBI, the lack of supporting documentation made it difficult to independently verify the reported revenues.

It also rejected the company's reliance on Swiss confidentiality and data protection provisions to withhold certain records.

Another aspect of the investigation relates to transactions involving SEBI-registered broker Affluence Shares and Stocks Pvt Ltd. SEBI alleged that Rajesh Exports recorded transactions worth more than ₹11,000 crore through Affluence between FY22 and FY24.

However, the broker reportedly informed investigators that Rajesh Exports was never its client and that it dealt only with founder-chairman Rajesh Mehta in his personal capacity.

The regulator also flagged alleged fund transfers from the company to Mehta that it said lacked the necessary approvals and disclosures.

Based on its prima facie findings, SEBI has barred Rajesh Exports and its Mehta from accessing the securities market pending completion of the investigation.

It has also directed the company to cooperate fully with investigators and a fresh forensic audit.

Rajesh Exports rejects allegations, cites 'communication gap'

Rajesh Exports has strongly denied SEBI's allegations and maintained that its reported revenues are accurate.

The company described the regulator's order as an interim measure and said it is working to clarify all issues raised during the investigation.

"There seems to be some type of communication gap and confusion between SEBI and the company," Rajesh Exports said in a statement, adding that it is in the process of submitting all required and relevant documents.

Mehta has also rejected the allegations, arguing that SEBI's analysis failed to properly account for consolidated revenue figures.

He insisted there was no revenue overstatement, misrepresentation or irregularity in the transactions questioned by the regulator.

According to Mehta, the company has already provided extensive documentation to SEBI and remains confident that its explanations will address the concerns raised in the interim order.

He has also maintained that the questioned revenue figures relate to a multi-year period and that investigators may have misunderstood aspects of the company's reporting structure.

Despite the company's defence, shares of of REL tumbled another 5 per cent on Friday, hitting the lower circuit limit, as investor sentiment remained under pressure .