Rajesh Exports Faces Fresh Audit Scrutiny Amid SEBI Investigation

The ongoing regulatory scrutiny into Rajesh Exports Ltd. has intensified focus on the role of statutory auditors after the Securities and Exchange Board of India (SEBI) raised serious concerns over the company’s financial reporting, overseas subsidiaries, and related-party transactions in its interim order dated 3 June.

The regulator’s observations have weighed heavily on investor sentiment, with the company’s shares declining around 11% since the interim order. Among the most significant findings, SEBI stated that it was unable to independently verify more than 98% of Rajesh Exports’ reported revenue, primarily because detailed financial statements of several overseas subsidiaries were not available for regulatory examination.

SEBI Raises Concerns Over Overseas Financial Reporting

According to SEBI, Rajesh Exports did not disclose the standalone financial break-up of several foreign subsidiaries, including:

REL Singapore Pte Ltd.
Bab Al Rayan Jewellery LLC (UAE)
GGR Switzerland
Valcambi Switzerland

The absence of these financial details prevented the regulator from independently validating the overwhelming majority of the company’s reported revenue, making it one of the central issues in the ongoing investigation.

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KPMG Switzerland’s Audit Disclaimer Draws Attention

Fresh scrutiny has emerged over the audit of Swiss subsidiary GGR Switzerland, where KPMG Switzerland issued what experts describe as a special-purpose audit opinion rather than a conventional statutory audit report.

The engagement letter reportedly contained an explicit disclaimer stating that the opinion had been prepared solely at the request of the company’s board of directors and did not constitute a statutory audit opinion under Swiss law. It further clarified that the report was not intended for any other purpose.

The opinion was signed by Antonella Pronzini, Director, Audit at KPMG Switzerland. No response was reportedly received from the audit partner regarding the scope of the engagement.

Experts Differ on Implications of Disclaimer

Tax and accounting experts have expressed differing views on the significance of the disclaimer.

Delhi-based Chartered Accountant Vinod K. Bansal observed that such restricted-use opinions are not unusual in multinational corporate structures and do not automatically indicate deficiencies in the audit process.

However, he noted that the audited financial statements were ultimately relied upon while preparing Rajesh Exports’ consolidated financial statements in India.

Since REL Singapore, the immediate holding company, was exempted from preparing consolidated financial statements in Singapore, the responsibility for group consolidation rested with Rajesh Exports in India.

Bansal explained that under international auditing standards, a parent company’s auditor may rely on component auditors, but the ultimate responsibility for obtaining sufficient and appropriate audit evidence over material subsidiaries continues to rest with the group auditor.

Former ICAI President Questions Audit Responsibility

Offering a more critical perspective, Ved Jain, former President of the Institute of Chartered Accountants of India (ICAI), stated that an auditor conducting a standalone audit cannot dilute its responsibility by relying solely on directions from the company’s board.

He observed that investors depend on auditors to independently verify financial statements and ensure that material irregularities are detected.

According to Jain, if a subsidiary auditor issues such an explicit disclaimer, auditors of the parent companies should undertake additional verification themselves or appoint another auditor to perform a comprehensive examination.

Rajesh Exports Rejects Significance of Disclaimer

Rajesh Exports Chairman Rajesh Mehta has reportedly rejected suggestions that the disclaimer affected the audit’s validity.

According to him, there was no ambiguity and KPMG had in fact carried out the statutory audit of GGR Switzerland despite the wording contained in the engagement documents.

Singapore Exemption Adds Another Layer

The controversy also extends to REL Singapore, which had obtained regulatory exemption from filing consolidated financial statements in Singapore.

Instead, consolidation of overseas subsidiaries was undertaken by Rajesh Exports in India.

However, SEBI has stated that Rajesh Exports subsequently informed the regulator that it could not separately disclose financial statements of all overseas subsidiaries because the Singapore entity had already consolidated them—a position that has itself become part of the regulator’s examination.

Battery Unit Auditor Resigns Over Regulatory Eligibility

Questions surrounding audit oversight are not limited to the precious metals business.

The statutory auditor of ACC Energy Storage Pvt. Ltd., Rajesh Exports’ battery subsidiary, resigned on 4 May, citing the expiry of the Peer Review Certificate, which became mandatory from 1 April 2026 for auditors signing financial statements of subsidiaries of listed companies.

In his resignation letter, auditor PV Ramana Reddy stated that he had become ineligible to sign the company’s financial statements due to the expiry of the certificate.

Notably, Reddy had earlier served as Rajesh Exports’ statutory auditor between 2018 and 2021 before BSD & Co.assumed the role.

Related-Party Transactions Under SEBI Scanner

SEBI’s interim order also scrutinised a series of transactions involving Rajesh Exports and its battery businesses.

According to the regulator:

Between April 2020 and December 2025, Rajesh Exports transferred approximately ₹566 crore to Elest Pvt. Ltd.
During the same period, Elest transferred around ₹350 crore back to Rajesh Exports.
The regulator questioned the commercial rationale behind the remaining ₹216 crore, which remains under examination.

The regulator also examined transactions involving ACC Energy Storage as part of its broader investigation into related-party dealings.

NFRA May Examine Statutory Auditors

In a significant development, SEBI directed that a copy of its interim order be forwarded to the National Financial Reporting Authority (NFRA) for consideration of appropriate action against the statutory auditors of Rajesh Exports, citing prima facie misconduct and possible dereliction of professional duties.

The referral indicates that the regulator believes the conduct of the auditors warrants independent examination by India’s audit watchdog.

Earlier Audit Concerns at Elest

Audit-related concerns had surfaced even earlier at Elest Pvt. Ltd., another battery business promoted by Rajesh Mehta.

Its former auditor, MSKA, had issued a disclaimer regarding the company’s internal financial controls in its FY2022 audit report, stating that it could not obtain sufficient audit evidence to express an opinion.

MSKA subsequently resigned in May 2023, citing reduced professional fees.

The company thereafter appointed Price Waterhouse Chartered Accountants LLP (PwC), which audited the subsequent financial years without reporting any significant deficiencies in internal controls.

Legal Experts Call for Greater Audit Scrutiny

Legal experts say the case highlights broader concerns regarding audit oversight in complex multinational corporate structures.

According to Sonam Chandwani, Managing Partner at KS Legal & Associates, where significant domestic and cross-border transactions are involved, it becomes legitimate to examine whether auditors exercised the level of professional scepticism expected under law.

Similarly, Sindhuja Kashyap, Partner at King Stubb & Kasiva, observed that while SEBI’s findings justify a closer review of audit procedures and risk assessment mechanisms, regulatory observations alone do not automatically establish auditor misconduct. Any conclusions regarding professional liability would ultimately depend on the outcome of detailed regulatory proceedings.

Investigation Continues

The SEBI proceedings remain at the interim stage, and the regulator’s findings are subject to further investigation and adjudication. The case is expected to have wider implications for group audits, overseas subsidiary reporting, auditor responsibilities, and corporate governance standards, particularly for Indian companies operating through complex international structures.