Rajesh Exports Under Government Lens as Sebi Order Triggers Fresh Concerns

Rajesh Exports Ltd. may soon face significant regulatory challenges after the Securities and Exchange Board of India (Sebi) raised serious concerns regarding the company’s financial reporting practices. According to a report by The Economic Times, the Ministry of Heavy Industries (MHI) is evaluating whether the company should continue to remain a beneficiary under the government's Production Linked Incentive (PLI) scheme for advanced battery manufacturing. Simultaneously, the Ministry of Corporate Affairs (MCA) is considering further examination of the company’s governance and compliance framework.

The developments follow Sebi’s interim order dated June 3, which highlighted alleged large-scale discrepancies in the company’s financial disclosures and identified possible fund-routing irregularities.

Ministry of Heavy Industries Reviewing PLI Eligibility

Sources familiar with the matter indicated that the Ministry of Heavy Industries is carefully reviewing Sebi’s findings. Officials reportedly believe there is a strong possibility that Rajesh Exports could be removed from the list of approved beneficiaries under the battery manufacturing incentive scheme. However, a final decision is expected only after a detailed internal assessment of the regulator’s observations.

Rajesh Exports had earlier secured approval under the government’s ₹18,100-crore National Programme on Advanced Chemistry Cell (ACC) Battery Storage, aimed at boosting domestic battery manufacturing capabilities. The company was tasked with establishing a production capacity of 5 GWh through its subsidiary, ACC Energy Storage.

MCA Monitoring the Situation Closely

Government officials also revealed that the Ministry of Corporate Affairs is coordinating with Sebi regarding the matter. Depending on the outcome of ongoing regulatory proceedings, the MCA may instruct the relevant Registrar of Companies (RoC) to conduct a formal inspection into the company’s affairs.

At present, Sebi remains the primary agency handling the investigation, while other government departments continue to assess the implications of the findings.

Company Denies Wrongdoing

Rajesh Mehta, Chairman and Managing Director of Rajesh Exports, has stated that the company has not received any official communication from either the Ministry of Heavy Industries or the Ministry of Corporate Affairs.

Commenting on Sebi’s action, Mehta reportedly described the regulator’s order as an interim observation rather than a final conclusion. He maintained that the order does not justify further scrutiny by the MCA and emphasized that there has been no negative communication concerning the company’s participation in the PLI scheme.

Questions Over Battery Manufacturing Project Progress

Separately, an internal review conducted by the Ministry of Heavy Industries reportedly found limited progress at the proposed battery manufacturing site. Officials noted that only a boundary wall and a shed had been constructed at the location designated for the project.

Despite being selected under the incentive program, Rajesh Exports has not yet received any financial subsidy from the government under the scheme.

Sebi Alleges Massive Financial Misrepresentation

In its interim ex-parte order issued on June 3, Sebi cited prima facie evidence suggesting substantial financial reporting irregularities involving Rajesh Exports and its Managing Director.

According to the regulator, approximately 97% to 99% of the company’s consolidated revenue originated from overseas subsidiaries, particularly Switzerland-based Valcambi SA. Sebi alleged that these transactions were not adequately disclosed and may have resulted in the misrepresentation of nearly ₹15.15 lakh crore in revenue between FY2020-21 and FY2024-25.

The market regulator further claimed that several transactions lacked genuine economic substance and were allegedly linked to derivative trading activities associated with Mehta. These transactions, Sebi stated, may have artificially inflated the company’s turnover figures.

Concerns Raised Over Audit Cooperation

Sebi also expressed concern regarding the conduct of the company’s statutory auditors. The regulator noted that audit working papers were not furnished despite prior commitments to provide them during the investigation process.

As part of its directions, Sebi has instructed Rajesh Exports and its Managing Director to fully cooperate with investigators within 30 days. The regulator has also mandated the appointment of a new forensic auditor to conduct a deeper examination of the company’s financial records.

Additionally, Mehta has been prohibited from buying, selling, or otherwise dealing in the company’s securities until further regulatory orders are issued.

Market Reaction

The controversy has weighed heavily on investor sentiment. Rajesh Exports shares declined 5% to ₹98.73 on the National Stock Exchange (NSE) on Friday. The stock has now lost approximately 10% over two consecutive trading sessions following the regulatory developments.

Meanwhile, Mehta has strongly rejected Sebi’s allegations, stating that the company is reviewing the interim order in detail and preparing an official response.

Short Summary

Rajesh Exports is facing increased regulatory scrutiny after Sebi alleged major financial misreporting and fund-routing irregularities. The Ministry of Heavy Industries is reviewing the company’s eligibility under the battery PLI scheme, while the MCA may initiate further inspections. The company has denied all allegations and is preparing its response.