New Delhi: Shares of gems and jewellery firm Rajesh Exports Ltd (REL) tumbled 5 per cent to hit the lower circuit limit Thursday, a day after capital markets regulator Sebi barred its promoter and CEO Rajesh Mehta from dealing in the company’s securities, alleging large-scale misrepresentation of financial statements and diversion of funds.
The stock dropped 4.99 per cent to hit the lower circuit limit at Rs 104.65 on the BSE.
At the NSE, the stock fell by 4.99 per cent to hit the lower circuit limit of Rs 103.92.
The company’s market valuation declined by Rs 162.38 crore to Rs 3,089.90 crore.
The Securities and Exchange Board of India (Sebi) also directed the company to make true and fair disclosures of financial statements, related party transactions and other disclosures under the Listing Obligations and Disclosure Requirements (LODR) regulations.
In a 109-page interim order on Wednesday, Sebi said its investigation has revealed misrepresentation in financial statements as well as instances of routing and layering of funds through personal accounts and related entities without adequate disclosures or supporting documentation.
The markets watchdog said the company was issued repeated summons and given several opportunities to furnish true and fair financial statements, complete records explaining the end-use, business rationale and ultimate beneficiaries of such fund flows, but there was no satisfactory response.
Sebi also flagged non-cooperation by REL’s statutory auditors. According to the order, the auditors, during the deposition, promised to provide audit working papers, but eventually failed to do so.
The regulator said such sustained non-cooperation is itself indicative of an intent to suppress material information and obstruct regulatory inquiry.
Sebi further observed that among the aberrations prima facie noted in the matter, about 97-99 per cent of REL’s revenue was inflated, which is egregious and unheard of.
The order held that Mehta was the key decision-making authority within REL and exercised substantial control over the day-to-day affairs and financial operations of the company and its subsidiaries.
Therefore, the regulator restrained Rajesh Mehta from buying, selling, or dealing in securities of REL, either directly or indirectly, until further orders.
“I note that REL has prima facie misrepresented approximately Rs 15,15,385 crore, i.e., representing 99.80 per cent of its revenues, which are attributed to subsidiaries during the period FY 2020-21 to FY 2024-25,” Sebi’s Whole Time Member Kamlesh Chandra Varshney said in the interim order.
Meanwhile, Rajesh Exports Thursday denied any financial irregularities, saying its reported revenues were correct and that there seemed to be a communication gap between the markets regulator and the firm.
“The revenues declared by the company are correct, and there is no over-stating of revenues. There seems to be some type of communication gap and confusion between Sebi and the company,” Rajesh Exports said in a BSE filing.
The Sebi’s order is interim, and there has been no adverse conclusion on any aspect. The company is in the process of clarifying all aspects to Sebi by submitting all the required and relevant documents, the Bengaluru-based jewellery exporter and refiner added.
Rajesh Exports stated that it is confident that Sebi, in its wisdom, will clarify the situation and arrive at the correct conclusion based on the authenticated documents, which the company is in the process of submitting.
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