Revenue Hit ₹7.7 Lakh Crore But CFO Allegedly Unpaid Since 2020 as ED Investigates Rajesh Exports' Finances

Revenue Hit ₹7.7 Lakh Crore But CFO Allegedly Unpaid Since 2020 as ED Investigates Rajesh Exports' Finances​

The Directorate of Enforcement (ED) has initiated a major investigation into Rajesh Exports Ltd (REL) and its associates following search and seizure operations at nine locations linked to the company. The probe focuses on allegations of significant irregularities, including suspected share manipulation, missing foreign transaction records, and highly unusual remuneration practices, according to an agency statement issued Wednesday.

The searches follow prior actions by the Securities and Exchange Board of India (SEBI), which had already passed an interim order against the promoters and the company regarding large-scale misrepresentation of financial statements. This multi-pronged investigation underscores deep concerns regarding the genuine nature of the company's reported operations.

Scrutiny Over Unusually Low Remuneration​

A key finding during the latest action under the Foreign Exchange Management Act (FEMA) related to executive compensation within Rajesh Exports. The ED alleged that the Chief Financial Officer (CFO) had not received any salary since 2020.

The investigation also revealed highly unusual payment structures for senior management. Despite the company reporting consolidated revenues amounting to around ₹7.7 lakh crore, the Managing Director was reported to have been paid only approximately Rs 17,000 a month. The agency stated that this remuneration structure reflected substantial departures from normal commercial practices.

Allegations of Share Manipulation and Block Trades​

The ED further alleged suspicious block trades involving Rajesh Exports shares, particularly those transactions connected to individuals identified in data leaks from the International Consortium of Investigative Journalists (ICIJ). Preliminary findings suggest possible undisclosed offshore links are currently under rigorous examination by the agency.

Furthermore, the investigation indicated that over ₹600 crore may have been siphoned out of India through share manipulation using NRI benamidars. These searches, conducted on June 23 at premises in Bengaluru and Mumbai, are part of the ongoing FEMA investigation into the company and its connected entities.

Lack of Records for Foreign Transactions​

Rajesh Exports was also accused by the ED of failing to produce crucial records related to several foreign transactions. This includes documentation pertaining to imports, exports, overseas investments, and the settlement of foreign trade receivables and payables.

Specifically, the agency alleged that documents substantiating a claimed investment of ₹1,035 crore in African Mines were neither found nor provided during the investigation. These issues regarding international financial dealings were also flagged previously by SEBI in its June 3 order.

Opaque Trade Set-Off and Stock Mismatch Uncovered​

Another critical area of focus relates to opaque netting or set-off arrangements involving foreign trade receivables and payables, valued at around ₹3,000 crore. The ED alleges these transactions involved suspicious overseas counterparties based in jurisdictions including the UAE.

The searches also uncovered a significant physical stock mismatch at the company premises. According to the ED findings, there is an approximate 40 percent difference between the inventory recorded in factory registers and the actual stock discovered during verification.

SEBI's Prior Concerns Over Financial Misrepresentation​

These latest allegations are rooted in earlier concerns raised by market regulator SEBI. In its interim order issued this month, SEBI alleged that Rajesh Exports misrepresented consolidated revenues aggregating to approximately ₹15.15 lakh crore during FY21-FY25. This figure accounted for nearly 99.8 percent of the company’s reported consolidated revenue for the period.

SEBI had previously questioned the veracity of several disclosures related to inventory, trade payables, and trade receivables. The regulator had also barred key promoters from accessing the securities market pending further investigation into these matters.

The ED confirmed that various incriminating documents and digital evidence were seized during the searches and are currently under examination. The investigation is ongoing.