Shares of Rajesh Exports Ltd. (NSE:REXP) fell steeply on Friday amid fresh regulatory accusations, with the stock moving to the lower circuit early in the session. The share price dropped 5% to 98.73 rupees and the stock was on track for a weekly loss of nearly 17%, having also reached a near one-month low.
India’s securities regulator, the Securities and Exchange Board of India, has alleged that the jewellery maker reported the vast majority of its revenue - roughly 97% to 99% - as originating from an overseas entity identified as Valcambi SA, based in Switzerland.
According to SEBI, standalone filings by Valcambi showed negligible revenues, a contrast the regulator says points to fabricated transactions. SEBI alleges that, across a five-year span, Rajesh Exports misrepresented a cumulative 15.15 trillion rupees in revenue, equivalent to approximately $158 billion, by recording sales and revenue entries that lacked genuine underlying economic activity.
The regulator further alleged that funds were illegally routed to personal accounts belonging to the company’s owner, Rajesh Mehta. As part of its measures, SEBI has barred Mehta from dealing in the company’s securities, describing the conduct as large-scale fraud in its allegations.
In response to the regulator’s claims, Rajesh Exports issued an exchange filing on Thursday denying SEBI’s allegations.
Market reaction
The immediate market response was pronounced, with the stock hitting the lower circuit within minutes of trading and sliding to near one-month lows. The price action reflected investor concern following the regulator’s assertions about revenue recognition and alleged diversion of funds.
What is clear from filings
SEBI’s case rests in part on the discrepancy between Rajesh Exports’ reported revenue streams and the standalone accounts of the overseas firm SEBI cited. The regulator contends that entries were made to inflate turnover in the absence of genuine sales activity.
The company has formally denied the regulator’s allegations in a filing made to the exchange on Thursday. Beyond that denial, the public record presented by SEBI and the company’s market performance are the principal elements available at this time.
Implications
The developments have immediate implications for shareholders and for perceptions of financial reporting integrity in the jewellery sector and related capital markets. The regulator’s action - including restrictions on the owner’s ability to deal in securities - marks a significant escalation in enforcement against the company.