ED Raids Rajesh Exports

The Enforcement Directorate (ED) has intensified scrutiny of jewellery exporter Rajesh Exports Ltd. after conducting raids/searches at multiple locations linked to the company and its promoters in Bengaluru and Mumbai.

The searches, carried out under the provisions of the Foreign Exchange Management Act (FEMA), come amid widening regulatory concerns over the company’s financial reporting, overseas transactions, and related-party dealings.

The latest action follows a series of allegations raised by market regulator SEBI, which recently issued an interim order highlighting what it described as serious irregularities in the company’s books of accounts and business transactions. The ED’s intervention signals a significant escalation in one of India’s most closely watched corporate investigations.

Nine Locations Searched in Bengaluru and Mumbai

According to sources familiar with the investigation, ED officials conducted coordinated searches at nine premises associated with Rajesh Exports and its promoters. The operation commenced early in the day and continued for several hours as investigators examined documents, electronic records, financial statements, and inventory-related data.

The searches are part of an ongoing FEMA investigation into suspected foreign exchange violations and alleged irregular movement of funds through domestic and overseas entities connected with the company.

Alleged Benami Transactions in Company Shares

Investigators are reportedly examining a series of transactions involving Rajesh Exports shares that were allegedly executed through benami entities. Preliminary findings suggest that certain share transactions may have been routed through individuals or entities acting on behalf of others, raising concerns about the true beneficiaries of the trades.

Officials are reportedly tracing the movement of funds linked to these transactions. Investigators suspect that more than USD 20 million may have been transferred outside India through structures and arrangements that are now under examination.

The ED is analysing whether these transactions violated FEMA provisions or other financial laws governing cross-border fund flows.

Gold Inventory Mismatch Raises Fresh Questions

One of the most significant findings emerging from the searches relates to the company’s gold inventory.

Sources indicate that investigators found a substantial discrepancy between the physical quantity of gold available and the stock reflected in company records. Preliminary assessments reportedly suggest that physical gold holdings were nearly 40 per cent lower than the quantity recorded in the books.

The alleged mismatch has prompted investigators to examine inventory management practices, stock disclosures, and accounting records maintained by the company. Authorities are expected to verify whether the difference arose from accounting issues, operational explanations, or more serious irregularities.

₹3,000 Crore Trade Receivables and Gold Imports Under Examination

The ED is also investigating transactions involving approximately ₹3,000 crore of trade receivables that were reportedly adjusted against gold imports.

Investigators are examining whether the imports actually occurred as represented and whether supporting documents accurately reflect the underlying commercial transactions. Authorities are expected to scrutinize import records, customs documentation, invoices, shipping details, and payment trails to establish the authenticity of the transactions.

Questions have reportedly arisen regarding the delivery and accounting treatment of the imported gold, making this a key focus area of the investigation.

UAE-Based Entities Draw Regulatory Attention

Another major aspect of the probe involves trade receivables and trade payables worth nearly ₹3,000 crore involving several entities based in the United Arab Emirates.

Investigators are examining the credentials of these overseas entities and the commercial rationale behind the transactions conducted with them. The nature, scale, and frequency of dealings have reportedly triggered regulatory concerns.

Authorities are seeking to determine whether these entities were engaged in genuine commercial activities or whether they played a role in facilitating questionable financial arrangements.

African Gold Mining Investments Under Scanner

The ED is also examining overseas direct investments made by Rajesh Exports in African gold mining assets.

According to information being reviewed by investigators, investments exceeding ₹1,000 crore may have been made in mining projects across Africa. However, authorities are reportedly examining whether corresponding disclosures were adequately reflected in the books of subsidiaries and related entities.

The probe is expected to focus on compliance with foreign investment regulations, disclosure requirements, and the ultimate utilization of invested funds.

SEBI’s Explosive Findings Triggered Wider Investigation

The current scrutiny gained momentum after SEBI issued a detailed interim order earlier this month containing serious observations regarding Rajesh Exports’ financial statements and reported revenues.

Based on a forensic review and regulatory investigation, SEBI stated that there was prima facie evidence suggesting that approximately 97 to 99 per cent of the company’s reported revenues over several financial years may have been overstated.

The regulator estimated the suspected overstatement at an astonishing ₹15.15 lakh crore, describing the findings as unprecedented and deeply concerning.

SEBI alleged that multiple layers of transactions involving entities linked to the company may have contributed to the apparent inflation of revenues. The regulator subsequently restrained promoter Rajesh Mehta from dealing in the company’s securities pending further directions.

The matter originated from a shareholder complaint submitted to SEBI in March 2024, which eventually led to a detailed investigation and forensic examination.

MCA and SFIO May Enter the Picture

The developments have also attracted attention from the Ministry of Corporate Affairs (MCA).

Reports indicate that the ministry has conducted preliminary reviews and is evaluating whether a broader corporate investigation is warranted. Authorities are reportedly considering expanding the scope of the inquiry or referring the matter to the Serious Fraud Investigation Office (SFIO), India’s premier agency for investigating complex corporate fraud cases.

If such a referral is made, investigators may examine not only current allegations but also historical corporate governance issues, accounting practices, and related-party transactions.

Rajesh Exports Rejects Allegations

Rajesh Exports has firmly denied wrongdoing and disputed SEBI’s findings.

The company maintains that its financial statements accurately reflect its business activities and has argued that the regulator’s conclusions stem from an incorrect interpretation of transactions involving its Swiss subsidiary, Valcambi.

According to the company, certain calculations relied upon by the regulator allegedly confused EBITDA figures with revenue figures, resulting in incorrect conclusions regarding the scale of business transactions.

Rajesh Exports has stated that it is providing supporting documentation and remains confident that the allegations will not withstand detailed scrutiny once all relevant material is examined.

Market Reaction Remains Mixed

Despite the regulatory challenges, Rajesh Exports shares have witnessed a notable recovery after an earlier sharp decline triggered by SEBI’s interim order.

The stock recently closed at ₹107.49 and hit the upper circuit limit, reflecting renewed buying interest after touching a 52-week low earlier in June. However, the broader picture remains challenging, with the stock still significantly lower on a year-to-date basis and having lost substantial value over the past six months.

Market participants remain cautious as multiple investigations continue simultaneously.

One of India’s Biggest Corporate Investigations

With the ED probing alleged FEMA violations, SEBI pursuing its market investigation, and the possibility of MCA and SFIO involvement, Rajesh Exports now finds itself at the centre of one of the most significant corporate investigations in recent years.

The outcome of these probes could have far-reaching implications not only for the company and its promoters but also for regulatory oversight of large-scale cross-border transactions, related-party dealings, and financial reporting practices in India’s corporate sector.

As investigators continue to analyse records, inventory data, overseas investments, and financial transactions, the coming months are expected to be crucial in determining the full extent of the allegations and the regulatory consequences that may follow.