Rajesh Exports shares jump 5% after SEBI order on alleged Rs 15.15 lakh cr fraud

Key facts

• Rajesh Exports shares rose 5% to hit the upper circuit on Monday.
• The stock had previously fallen 30% in seven sessions following a SEBI interim order.
• SEBI's order alleges prima facie evidence of significant revenue inflation, potentially 97-99% of reported revenue.
• SEBI restrained promoter Rajesh Mehta from trading Rajesh Exports securities.
• Rajesh Exports attributes the alleged inflation to a communication gap and confusion with SEBI regarding EBITDA versus revenue.
• Rajesh Mehta denied impeding the audit and stated the company submitted all requested documents.

Shares of Rajesh Exports surged 5% to hit the upper circuit on Monday, marking a rebound after a sharp 30% decline over the preceding seven sessions. The downturn was triggered by an interim order from the Securities and Exchange Board of India (SEBI) alleging significant revenue inflation. SEBI's investigation and forensic review suggested that approximately 97-99% of the company's revenue may have been inflated, a finding described as "egregious and unheard of."

In response to the SEBI order, Rajesh Exports clarified that the order is interim and no adverse conclusion has been reached. The company asserted that its declared revenues are correct and no overstating of earnings has occurred, attributing the discrepancy to a "communication gap and confusion" with SEBI. Rajesh Exports suggested that SEBI may have considered EBITDA of Valcambi instead of revenue, leading to the stated difference.

The market regulator has restrained promoter Rajesh Mehta from buying, selling, or dealing in securities of Rajesh Exports until further notice and directed the company to cooperate fully with investigators. This action followed a shareholder complaint received in March 2024. Rajesh Mehta, in an interview, denied allegations of impeding the audit process and stated that the company has been forthcoming with investigators, submitting all requested documents. He indicated no reason to legally contest the order as it contains no fines, penalties, or coercive actions.