What Sebi Found At Rajesh Exports And Why The Company Disagrees

Rajesh Exports Chairman Rajesh Mehta has denied Sebi's allegations of fund diversion and revenue inflation, claiming the regulator misunderstood accounting entries.

The response comes after Sebi's interim order raised concerns over related-party transactions and financial disclosures.

Source : PTI

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Key points generated by AI, verified by newsroom

• Rajesh Exports chairman denies fund diversion, blames SEBI's accounting misread.
• SEBI flagged circular fund transfers, undisclosed subsidiary stake reduction.
• Regulator alleges massive revenue misreporting; barred chairman trading.

Rajesh Exports Chairman Rajesh Mehta on Tuesday denied that funds were diverted from its subsidiary ACC Energy Storage or promoter-controlled Elest Ltd, saying the market regulator had failed to understand the accounting entries involved.

"First of all, the Sebi has made observations. That has to be put in the right place first. Point number two, there is zero diversion of funds. They have not understood the accounting entries," Mehta told PTI. The company is ready to clarify, he added.

The denial comes days after the Securities and Exchange Board of India issued a 109-page ex parte interim order on June 3, alleging wide-ranging financial fraud by the Bengaluru-based gold jewellery manufacturer.

Revenue Inflation Allegations

The regulator alleged that Rajesh Exports inflated revenues by Rs 15.15 lakh crore between FY21 and FY25. This amounts to roughly 99.8 per cent of the revenues attributed to its subsidiaries over the period being materially misrepresented, Sebi said. The order also flagged opaque related-party transactions and disclosure failures involving two entities tied to the company's lithium-ion cell business: Elest Pvt Ltd and ACC Energy Storage Pvt Ltd. 

The company's own Managing Director and Chief Financial Officer told the regulator they were unaware of the transactions in question. Sebi has barred Mehta from buying, selling, or dealing in Rajesh Exports shares pending further proceedings and has ordered a fresh forensic audit of the company's books.

The ACC Energy-Elest Fund Routing

After promoter-controlled Elest Pvt Ltd acquired a 49 per cent stake in ACC Energy Storage in January 2025, it transferred Rs 147 crore to the subsidiary. ACC Energy returned Rs 112 crore to Elest on the same day. Separately, ACC Energy also invested Rs 262 crore in Elest without disclosing any valuation details. Sebi concluded that this cross-holding arrangement was a "device, scheme and artifice to mislead investors." 

It reduced Rajesh Exports' stake in ACC Energy from 100 per cent to 51.05 per cent, effectively transferring nearly 49 per cent to a promoter-owned entity while violating related-party disclosure rules and constituting fraudulent trade practices, the order said.

PLI Scheme Participation Under Threat

The allegations have put the company's place in the Rs 18,100-crore Advanced Chemistry Cell Production-Linked Incentive scheme in serious doubt.

The Ministry of Heavy Industries, which administers the battery storage PLI programme, is examining the Sebi order to determine next steps. 

Sources in the ministry told PTI there is a strong view within the department that Rajesh Exports should be dropped from the scheme. The matter will be placed before Heavy Industries Minister H D Kumaraswamy, who has returned from an official visit to Kyrgyzstan. A final call will be taken in the coming days, the news agency reported.

The ACC PLI scheme was designed to reduce India's dependence on imported advanced chemistry cells and build a competitive domestic battery manufacturing industry. At present, domestic demand continues to be met largely through imports.

Mehta Says Battery Plant Making Progress

On the PLI project itself, Mehta said there has been "fair progress" and that the company has applied for a one-year extension, citing delays in research and development.

"We are coming out with one of the finest and absolutely 100 per cent home-grown innovative battery cells. It is not there anywhere in the world. So, the research and development is taking some time," he told the news agency.

The ACC battery plant in Hubli, Karnataka, is 60 to 65 per cent complete, Mehta said, adding that the company has submitted its explanation for the delay to the ministry. The original deadline for completing the project was the end of 2025.

Rajesh Exports and Mehta have denied Sebi's findings and stated they are cooperating with the investigation.