Regulatory Watch: Sebi Identifies Potential Opaque Investments in Rajesh Exports

Sebi Flags Issues at Rajesh Exports

The Securities and Exchange Board of India (Sebi) has put Rajesh Exports Ltd (REL) under scrutiny due to two separate issues related to the company's investment disclosures. The market regulator has flagged an unverified claim linked to "gold mines in Africa" and transactions involving electric vehicle company Elest Pvt Ltd, a promoter-linked entity.

According to Sebi's interim order dated June 3, REL's "other non-current investments" on a consolidated basis rose from Rs 879.60 crore in FY21 to Rs 1,035.27 crore in FY23 before jumping to Rs 10,547.72 crore in FY25. The National Stock Exchange had sought details from the company on the Rs 1,035.27 crore "other non-current investments" reported as on March 31, 2023. REL told the exchange in July 2024 that the amount pertained to "investment in gold mines in Africa," but this claim could not be corroborated from the financial statements and information available on record.

The regulator examined the standalone financial statements of REL and those of its subsidiaries, REL Singapore and Global Gold Refineries AG. It found no traceable investment identifiable as gold mines in Africa corresponding to the claim. In its response, REL said it was unable to locate its earlier response furnished to the exchange due to absence of date details. It added that investments in gold mines existed through foreign subsidiaries and the investment figures were "tallying and correct." However, Sebi said mere assertions that investments exist through foreign subsidiaries, without furnishing any traceable linkage in the financial statements or supporting records, do not satisfactorily explain the disclosure made in the consolidated financial statements.

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The Elest transactions raise a separate but related governance issue. Sebi noted that Elest Pvt Ltd was incorporated in October 2020 by Rajesh Mehta and Prashant Mehta and was engaged in manufacture of lithium-ion cells, battery packs, and electric vehicles. Since Rajesh was a common director and Elest was substantially owned and controlled by him, Sebi treated the company as a related party of REL. The regulator found that REL transferred Rs 565.88 crore to Elest between FY21 and FY26, while Elest transferred Rs 350.03 crore back to REL, resulting in a net outflow of Rs 215.85 crore from REL to Elest. These fund movements were not adequately disclosed as related-party transactions.

The investment trail through ACC Energy Storage Pvt Ltd, REL's energy storage subsidiary, is also complex. Sebi flagged a cross-holding arrangement between ACC Energy and Elest. On January 1, 2025, REL acquired an additional 2.55 crore shares of ACC Energy at Rs 60 a share, while Elest subscribed to 2.45 crore shares at the same valuation. Following this, REL's shareholding in ACC Energy fell from 100 percent to about 51.05 percent, while Elest's shareholding rose to about 48.95 percent.

The regulator said preliminary analysis of available bank statements showed that Elest transferred Rs 147 crore to ACC Energy, of which ACC Energy transferred Rs 112 crore back to Elest on the same date. Sebi also said REL's managing director Suresh Gowda and CFO Vijendra Rao, in their depositions, said they were unaware of the Rs 147-crore investment by Elest in ACC Energy and a subsequent Rs 262-crore investment by ACC Energy in Elest. These transactions raised concerns over diversion and routing of funds, non-transparent related-party arrangements, absence of adequate approvals, and deficiencies in disclosures to shareholders and investors.

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The regulator said the cross-holding arrangement resulted in dilution of REL's stake in ACC Energy and "alienation" of about 48.95 percent stake in ACC Energy to Elest, an entity substantially owned and controlled by Rajesh Mehta. REL was granted an opportunity through several summons to explain the rationale underlying the investment by REL in Elest. "However, the responses furnished by REL vide email dated March 17, 2026 require detailed examination and independent verification which is ongoing," the interim order said.

In a statement issued to stock exchanges on June 4, REL said the order was interim in nature and that "there has been no any adverse conclusion on any aspect arrived by Sebi." The company said its declared revenues were correct and there was "no over stating of revenues," adding there appeared to be "some type of communication gap and confusion" between Sebi and the company. REL further said it was in the process of clarifying all aspects to Sebi by submitting the required and relevant documents. It expressed confidence that Sebi would arrive at the correct conclusion based on authenticated documents being submitted by the company.