Regulators should now insist that material overseas components of Indian listed groups be audited to standards the home regulator can verify | Photo Credit: AndreyPopov

In Italian, the word “Valcambi” means “ exchange of valuables”. Ironically, this word features frequently in an interim order passed by SEBI against Rajesh Exports Ltd (REL). The order states that REL and Valcambi were exchanging purchases and sales but were not recording it at the same values.

The interim order has arrived at a number that should make every auditor, audit committee member and investor sit up — ₹15,15,385 crore. That is the quantum of consolidated revenue of REL between financial years 2021 and 2025, which the regulator prima facie believes was misrepresented. The order, passed against the company and one of its promoters under Sections 11 and 11B of the SEBI Act, reads less like a routine enforcement action and more like a case study on everything that can go wrong with consolidated financial statements.

Vanishing revenues

Between 97 per cent and 99 per cent of REL’s consolidated revenues emanated from its overseas subsidiaries and step-down subsidiaries. These transactions were principally routed through Global Gold Refineries (GGR) AG in Switzerland, which in turn had a subsidiary called Valcambi SA. REL told SEBI that Valcambi was the principal operating entity of the group and that the holding companies had no day-to-day operations. However, Valcambi’s audited standalone financial statements, disclosed revenues of only about ₹543 crore in calendar year 2023 — against consolidated revenues of approximately ₹2,80,676 crore reported by REL for the same year.

The explanation offered — that Valcambi recognised only processing charges while GGR recognised the gross value of gold transactions — failed to impress the regulator. GGR was admittedly a holding company with no operations, its consolidated numbers were prepared voluntarily under a Group Accounting Manual without a statutory audit under Swiss law, and there were no principal-agent assessments, ownership records or reconciliations to show how an entity with no business recognised revenues running into lakhs of crores.

The broker who wasn’t

About 66 per cent of REL’s standalone sales and purchases during FY 2021-22 to FY 2023-24 — over ₹11,400 crore on each side — were recorded with one counterparty, Affluence Shares and Stocks Private Ltd, a SEBI-registered stockbroker. When questioned, Affluence stated that REL was never its client and that it had never executed a single transaction with the company. Its only relationship was with the promoter in his personal capacity.

REL’s GST returns showed no purchases from Affluence at all. The entries in the books, SEBI found, substantially corresponded with the promoter’s personal derivative trades — booked in the company’s accounts as sales and purchases of nearly equal value, generating near-zero margin. Add to this an Investment in Gold Mines in Africa of ₹1,035 crore that could not be traced to any entity in the group, and trade receivables concentrated (98-99 per cent) in four overseas parties, allegedly settled through supplies of gold rather than banking channels.

The Swiss defence

REL’s response to repeated summons was to invoke Swiss data protection law and confidentiality agreements. SEBI’s response to this was that the Swiss Federal Act on Data Protection protects natural persons, not corporate financial information. It also ruled that a listed entity that chooses to structure its operations through overseas subsidiaries cannot rely on foreign law to defeat its disclosure obligations under Indian securities law. The company had also failed to upload the financial statements of any subsidiary on its website, as mandated by Section 136(1) of the Companies Act, 2013 and Regulation 46(2)(s) of the LODR Regulations — contending, remarkably, that subsidiary financials were clearly derivable from consolidated figures.

Lessons for auditors

The order restrains the promoter from dealing in REL securities, directs a fresh forensic audit and forwards a copy to the National Financial Reporting Authority to examine the statutory auditors’ work. The auditors had Valcambi’s audited Swiss statements in hand; the chasm between those numbers and the unaudited GGR consolidation was not hidden in a footnote — it was the entire balance sheet. SA 600 on using the work of another auditor, and Ind AS 110 on consolidation, gave them every reason to probe.

The deeper lesson is for the market’s gatekeepers collectively. A shareholder complaint about aged receivables triggered this investigation. Regulators should now insist that material overseas components of Indian listed groups be audited to standards the home regulator can verify. This episode reinforces two well-known facts. Related party transactions are extremely convenient. The convenience of related party transactions is also its biggest risk.

The writer is a chartered accountant

Published on June 17, 2026