Summary of this article
Rajesh Exports promoter denies Sebi financial fraud claims
Company plans to resubmit financial proof within fifteen days
Government considers removing Rajesh Exports from PLI scheme
Shares of Rajesh Exports fell 5 per cent to an early low of Rs 93.8 apiece on the NSE on June 8 following major corporate and regulatory developments over the weekend. Notably, the stock has extended a losing spree and has slipped nearly 10 per cent since June 3, the date on which Sebi released its interim ex-parte order.
The company is planning to resubmit all necessary documentation to the Securities and Exchange Board of India (Sebi) within 15 days. Notably, the move comes after Sebi passed an ex-parte interim order against the company on June 3. Incidentally, the Ministry of Heavy Industries is also actively considering dropping Rajesh Exports from the list of production-linked incentive beneficiaries for advanced chemistry cell battery storage, according to a report by news agency PTI.
Notably, the move follows the market regulator passing an ex-parte interim order against the company on June 3..
Rajesh Exports Promoter's Clarification
Founder and chairman Rajesh Mehta has said that Sebi’s findings are rooted in a fundamental accounting error. Mehta added that the company has already provided Sebi nearly 300-400 gigabytes of documents and Sebi has not found the ‘correct documents’.
"We had given them 300-400 GB documents, running into lakhs (of pages). I think they have not been able to find the correct documents. The whole confusion has happened there,” Mehta said.
Mehta said that Sebi is likely to have mistakenly treated the company’s earnings before interest tax depreciation and amortisation (Ebitda), which represents gross profit, as its total revenue. Mehta used an analogy of a high-volume, low-margin gold bullion transaction. He explained that if a customer buys gold worth Rs 30,000, that full amount represents the revenue, while the gross profit might only be Rs 1,000.
According to Mehta, the regulator recorded the Rs 1,000 profit figure as the base revenue. Mehta added that no company has a rational incentive to artificially inflate its revenue without any corresponding benefit to the bottom line or net profits.
Rajesh Exports PLI Disqualification
The stock is also expected to be in focus on account of further headwinds from the government regarding its clean energy expansion plans. According to a separate report by PTI, there is a strong view within the Ministry of Heavy Industries that Rajesh Exports should be excluded from the beneficiary list of the battery storage incentive program.
The ministry is currently examining the details of the regulatory order to determine its next course of action. The final decision on the matter will be placed before the Union Heavy Industries Minister, H D Kumaraswamy. The regulatory order has also drawn attention to disclosure lapses and unapproved fund routing involving Elest Pvt Ltd and ACC Energy Storage Pvt Ltd, which are the two primary entities linked to the company's lithium-ion battery venture.
What Sebi Alleged In Its Order
Earlier on June 3, Sebi alleged in its 109-page interim ex-parte order, that Rajesh Exports had misrepresented its financial information. The market watchdog mentioned in the order that Rajesh Exports manipulated and inflated its consolidated revenues by a staggering Rs 15.15 lakh crore over a five-year period stretching from FY21 to FY25.
According to the watchdog's preliminary findings, this massive volume represented roughly 99.8 per cent of the total revenue reported by the company's subsidiaries, meaning nearly the entire top-line performance was misrepresented.
Furthermore, the market regulator noted that substantial corporate funds were diverted into the promoter's personal trading accounts without receiving the necessary approvals from the board or the audit committee. Consequently, the regulator ordered a fresh forensic audit of the corporate books and issued an immediate restriction barring the promoter from trading or dealing in the company's securities.
Earlier on June 5, Rajesh Exports shares closed at Rs 98.73 apiece down by 4.99 per cent on the NSE. On a month-to-date basis the stock has declined over 16 per cent on the NSE.
