What began as a routine shareholder complaint has emerged as one of the most significant accounting investigations in India's capital markets in recent years. The matter started on March 11, 2024, when the Securities and Exchange Board of India (Sebi) received an email from a shareholder of Rajesh Exports Ltd (REL), one of India's largest gold exporters and refiners. The complaint initially raised concerns over substantial trade receivables that had remained outstanding on the company's books for an extended period.

As Sebi examined the issue, the regulator widened the scope of its inquiry and sought extensive information from the company, including customer-wise sales records, vendor details, debtor and creditor data, subsidiary financial statements, transaction-level documentation, and access to accounting systems, according to a Business Standard report. 

According to Sebi's interim order, several of these requests were either not answered or only partially addressed. A forensic auditor appointed during the investigation reportedly faced difficulties obtaining access to key accounting records, enterprise resource planning (ERP) systems, books of accounts, and journal entries. The auditor further noted that a significant portion of sampled transactions could not be independently verified due to incomplete or unavailable supporting documents.

The regulator said that among transaction samples exceeding Rs 7,000 crore, complete documentation was provided for only a limited portion of the value reviewed. These findings prompted Sebi to move beyond the original receivables issue and scrutinise the company's broader financial reporting practices.

Rajesh Exports subsidiary structure 

A major focus of the investigation became Rajesh Exports' overseas subsidiary structure, the Business Standard report said. At the top sits Rajesh Exports Ltd in India, which wholly owns REL Singapore. The Singapore entity owns Switzerland-based Global Gold Refineries AG (GGR), which in turn controls Valcambi SA, the Swiss gold refinery that Rajesh Exports has consistently described as the group's principal operating business.

Sebi observed that these foreign subsidiaries accounted for nearly the entire consolidated business of the group. Between FY21 and FY25, Rajesh Exports reported consolidated revenue of around Rs 15.45 trillion, with approximately Rs 15.18 lakh crore attributed to subsidiaries and step-down subsidiaries.

However, Sebi's analysis raised questions over these figures. The regulator compared the reported revenues with the audited standalone financial statements of Valcambi SA. According to the order, Valcambi reported annual revenues ranging between roughly Rs 427 crore and Rs 743 crore during the corresponding years, while GGR and Rajesh Exports disclosed revenues running into several trillion rupees.

Rajesh Exports explained that Valcambi's standalone accounts reflected only processing and value-addition income, whereas GGR recognised the gross value of gold transactions. Sebi, however, stated that the company did not provide sufficient supporting evidence, reconciliation statements, accounting opinions, ownership documentation, or transaction-level records to substantiate this accounting treatment.

The regulator said that its concerns stem not merely from the size of the reported figures but from the inability to independently verify the underlying transactions despite repeated requests for supporting material. Based on its preliminary findings, Sebi has alleged that nearly Rs 15.15 trillion of revenue attributed to subsidiaries between FY21 and FY25 may have been misrepresented.

Rajesh Exports contests Sebi's observations 

Rajesh Exports has strongly contested several of Sebi's observations. The company argued that information relating to its subsidiaries was adequately reflected within its consolidated financial statements and that additional disclosures were not necessary. Sebi disagreed, maintaining that disclosure of subsidiary financial statements constitutes a separate legal obligation.

The company also cited Swiss confidentiality and data-protection laws as reasons for withholding certain information relating to overseas operations. Sebi rejected this explanation, stating that such restrictions do not exempt the company from cooperating with Indian regulatory requirements.

The case has drawn significant attention across market circles due to the scale of the allegations and the company's institutional shareholding profile. Life Insurance Corporation of India (LIC) holds approximately 10.8 percent of Rajesh Exports, making it one of the company's largest shareholders.

With allegations involving potential revenue misrepresentation, disclosure lapses, and challenges in verifying overseas operations, the investigation has emerged as one of the most closely watched corporate governance cases in India's listed-company universe.