The Enforcement Directorate (ED) has launched an investigation into the Bengaluru-based gold refining and jewellery manufacturing company, Rajesh Exports, following a series of raids that commenced on June 23 and extended until Wednesday. The agency has reported uncovering significant irregularities, including a suspicious overseas investment of Rs 1,035 crore and opaque foreign trade transactions amounting to approximately Rs 3,000 crore. Additionally, there is a noted inventory mismatch of 40 per cent and an alleged share-manipulation scheme involving Rs 600 crore.

These searches were executed at nine locations across Bengaluru and Mumbai as part of a broader probe into potential violations of the Foreign Exchange Management Act (FEMA). During the raids, investigators seized various incriminating documents and digital evidence that are currently being analysed to examine possible foreign exchange violations.

One critical aspect of the ED’s inquiry is that Rajesh Exports allegedly failed to provide essential documentation related to its foreign transactions, which included imports and exports. The absence of these documents has complicated the verification process for the authenticity of the transactions.

Suspicious Investments and Transactions Under Scrutiny

Among the significant transactions being scrutinised is Rajesh Exports’ claimed investment of Rs 1,035 crore in mining projects within Africa. The ED stated that no contemporaneous records or supporting documents regarding this investment were identified in the course of the searches.

In relation to foreign trade, the investigation has indicated that Rajesh Exports adjusted around Rs 3,000 crore in payments and dues through transactions that lacked transparency. Investigators have pointed out that the company offset its receivables against payables involving overseas parties, notably those based in the United Arab Emirates. This has raised concerns about whether these transactions were designed to obscure the actual nature of foreign exchange movements.

Furthermore, during physical inspections at the company’s facilities, the ED reportedly discovered considerable discrepancies—specifically, a 40 per cent difference between inventory records and the actual stock present. This discrepancy forms a pivotal focus of the ongoing investigation.

Concerns Regarding Management Remuneration and Share Manipulation

The ED has raised questions about what it describes as “disproportionate remuneration” to the senior management of Rajesh Exports. Notably, despite the company reporting consolidated revenue of nearly Rs 7.7 lakh crore, its Chief Financial Officer has reportedly not received a salary since 2020, and its Managing Director allegedly earned only around Rs 17,000 per month. Such figures are viewed as inconsistent with the norms expected for a company of this size.

In parallel with these findings, the ED indicated that it has identified dubious block trades in Rajesh Exports shares, involving individuals associated with disclosures from the International Consortium of Investigative Journalists (ICIJ). It is alleged that over Rs 600 crore may have been moved out of India through share manipulation linked to non-resident Indian (NRI) entities. These transactions are currently being examined within the broader scope of the FEMA investigation.

Meanwhile, the Securities and Exchange Board of India (Sebi) is simultaneously conducting a detailed investigation into the company’s accounting and financial reporting. Sebi’s scrutiny intensified following a shareholder complaint in March 2024 regarding substantial unpaid trade receivables, which has led to a forensic audit being commissioned and temporary restrictions placed on the company’s promoter-chairman, Rajesh Mehta.

Rajesh Exports has consistently denied any allegations of wrongdoing in response to Sebi’s interim order, asserting the accuracy of its reported revenues. The company has characterised the circumstances as a ‘communication gap’ and indicated that it is in the process of addressing the concerns raised by the regulatory bodies.

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