Rajesh Exports’ ‘gilded’ accounts

SEBI’s searing report on the accounting irregularities indulged in by Rajesh Exports Ltd (REL) exposes a multi-layered deception that went undetected by the auditors and institutional buyers.

Apart from SEBI’s incriminating findings (see desk), fairly a couple of numbers and metrics in RELs monetary statements defy accounting logic. For instance, capital turnover ratio of two,698 per cent, an excellent 136 per cent larger than any firm (non-financials) within the Nifty 500 and FY25 income of ₹4.2 lakh crore that will have ranked it within the high 10 amongst listed corporations when it comes to income whereas it had market cap of a small cap inventory.

SEBI’s findings

The important thing amongst SEBI’s findings is the questionable nature of ₹15.4 lakh crore value of REL’s income, unfold over a five-year interval from FY21 to FY25, whereas the precise income may roughly be complete to a mere ₹3,000 crore.

REL is a gold refiner and producer of gold merchandise. Its company construction and consolidated income as reported are given within the chart and within the desk respectively. REL’s personal standalone income, as in row ‘B’ (material of one other allegation) seems small in opposition to the consolidated income — implying that 97-99 per cent of the group’s income is accounted for by the income of REL’s subsidiaries.

Whereas subsidiary Valcambi SA (Switzerland) is recognized because the principal working entity of the group, the remainder of the entities are both simply holding corporations or ones with dormant operations. Therefore, it’s affordable to imagine that just about your entire group income is contributed by Valcambi SA (see row ‘D’ in desk).

Valcambi SA’s standalone books had been audited beneath Swiss regulation by KPMG SA. Whereas Valcambi SA accounted just for worth addition within the refining course of, its holding firm accounted transactions on a gross foundation — that’s, recognise the worth of gold acquired for refining as purchases and that of the refined gold as income — giving rise to the big income figures on the group degree. This inconsistency in accounting therapy is what SEBI calls ‘prima facie untenable’.

Provided that Valcambi SA itself accounts just for the worth addition, it’s questionable how a non-operating holding firm can recognise income otherwise — on the market worth of products belonging to 3rd events. SEBI argues that REL has not furnished enough grounds resembling bullion possession information, stock danger allocation or accounting opinions to justify the differential accounting therapy. GGR’s consolidated books had been ready voluntarily and KPMG SA’s opinion thereon doesn’t represent a statutory audit opinion beneath Swiss regulation. Additional, it isn’t clear whether or not the accounts of most important subsidiary REL-Singapore which accounts for nearly total income of REL had been audited in any respect.

Unaudited accounts

The FY25 annual report has an announcement from Auditors BSD & Co that they’d not audited the financials of any of the subsidiaries however had as a substitute relied on a set of memorandum consolidated financials of overseas subsidiaries that the board of REL itself had ready for his or her unmodified opinion (clear report), implying that the subsidiary accounts had been un-audited. One thing like this provides ample area for gross misrepresentation.

One other essential level in SEBI’s findings is how the corporate claimed to have purchased a mine in Africa for round ₹1,000 crore in FY23, however information reveal no identifiable funding. Additional the money stream assertion in FY25 reveals a 55 occasions enhance in working money flows over FY24. Apparently, virtually entirety of it’s from weird fall in commerce receivables in a yr during which income glided by 51 per cent and commerce payables rose sharply. Such massive modifications in commerce receivables and commerce payables including to web money inflows raises doubts on veracity.

Retail shareholders appear to have obtained sucked into all this drama. Within the final three years because the shares crashed, retail shareholding elevated from round 1.6 to over 14 per cent! And to not neglect LIC, which nonetheless owns a large 10.8 per cent in REL (as of March 2025), marginally decrease from round 11.04 per cent in March 2023.

Printed on June 5, 2026