Rajesh Exports won't challenge SEBI interim order, to cooperate with fresh forensic audit

Bengaluru-based gold jewellery firm Rajesh Exports Ltd, which is under regulator SEBI's scanner over suspected revenue inflation of up to ₹15.15 lakh crore for the 2020-21 to 2024-25 period, on Wednesday said it will fully cooperate with the fresh forensic audit ordered by the market watchdog and will not challenge the interim order.

In an interview with PTI, company founder and chairman Rajesh Mehta denied allegations that Rajesh Exports had impeded the audit process and said the company had been forthcoming with investigators throughout.

"I would never agree with the fact that certain relevant documents have not been submitted by us. We have submitted everything we were asked for. SEBI has not found something; maybe we have missed out on something. All that will be reconciled now," Mehta said.

SEBI, in an interim order, has held that gold refiner and jewellery manufacturer REL allegedly inflated its consolidated revenues by ₹15.15 lakh crore over five years by attributing massive revenues to overseas subsidiaries, particularly Switzerland-based Valcambi SA, despite the subsidiary's audited standalone financial statements showing only a fraction of those amounts.

The regulator has raised serious concerns over what it described as a prima facie misrepresentation of the company's financial position, noting that almost the entirety of REL's reported revenues was attributed to overseas subsidiaries whose financial statements were not made publicly available.

Documents in order

Mehta attributed the gaps flagged by the regulator to the sheer volume of data — around 400 GB — maintained by the company, suggesting certain documents may have been difficult to locate rather than withheld.

He said REL has already begun furnishing documents sought under the interim order and expects to complete the exercise within five to six days.

In its interim order dated June 3, SEBI directed REL to cooperate with the investigating authority, submit requisite documents and explanations within 30 days, and make true and fair disclosures in its financial statements, related-party transactions and other filings.

On SEBI's observation that REL had denied forensic auditors access to its enterprise resource planning system, journal dumps and books of accounts, Mehta said the auditors had been given dedicated space in the company's offices for over two months and were provided all requested material.

"If they did not find anything further, they could have told us that they needed more information — we would have given it to them. Can they show even one email in writing which says that we have not given them something?" he said.

Mehta also pushed back against the forensic auditor's statement that the interim report carries significant limitations owing to REL's alleged non-cooperation.

"They have been continuously looking at documents, continuously seeking explanations for two and a half years. If I did not want to cooperate, I would not have cooperated from day one," he said.

No challenge planned

On whether the company plans to legally contest SEBI's directions, Mehta said there was no reason to do so.

"SEBI has all the authority and the right to keep asking us for documents for any number of years. There is no fine, no penalty, no coercive action in this order. Why should we challenge it?" he said.

He also noted that the trading restriction in the order applies to an individual and not to the company.

"The company has not been barred from doing anything," he added.

Mehta said that of the several thousand clarifications sought by SEBI over the past two-and-a-half years, only nine remain unresolved to the regulator's satisfaction, of which the revenue inflation query is just one.

"All the other eight questions are minor. Even this ninth question is absolutely minor. SEBI has found certain things suspicious and needs more documents. SEBI has not made any allegations," he said, adding that once the final order is issued, he is confident the conclusion will be favourable to the company.

Asked whether a final SEBI order imposing a penalty would be challenged, Mehta said: "I am confident there will be no adverse action in the final order once we provide all documents and explanations. But if an irrational final order is passed, we will definitely challenge it."