Gold refiner and jewellery exporter Rajesh Exports on Sunday said it had already submitted 300-400 gigabytes of documents to markets regulator Sebi but believed the watchdog had been unable to locate the correct files, adding that the company would resubmit all sought documents within 15 days to resolve the matter.
The company's founder and chairman, Rajesh Mehta, in an interview to PTI, said Sebi's interim order of June 3 - which alleged revenue inflation of Rs 15.15 lakh crore over FY21-FY25 - was rooted in a fundamental accounting error in which the regulator had taken the company's EBITDA figures and classified them as revenue.
"We had given them 300-400 GB documents, running into lakhs (of pages). I think they have not been able to find the correct documents. The whole confusion has happened there," Mehta said.
"They have taken the EBITDA and termed it as revenue. EBITDA means gross profit. They have taken the gross profit and termed it as revenue. Looking at the number (Rs 15.15 lakh crore), they have made a huge mistake," he added.
Mehta explained the alleged error using a jewellery shop analogy. In a high-volume, low-margin gold bullion business such as Rajesh Exports, a customer buying 2 grams of gold at a showroom would receive a bill of Rs 30,000, which constitutes the revenue.
The gross profit on that transaction would be Rs 1,000, and the net profit Rs 500. He alleged that Sebi had recorded the Rs 1,000 gross profit as the revenue figure rather than the Rs 30,000 top line.
"Sebi has not commented on the Rs 500 net profit - they accept that figure. But they are taking the Rs 1,000 EBITDA and calling it the revenue," he said.
Applying the same logic to Rajesh Exports, the company buys gold at Rs 100 and sells it at Rs 101, earning Re 1 as gross profit - and it is that Re 1, Mehta alleged, that Sebi has treated as revenue rather than the full Rs 101 sale value.
"It is a clear matter of confusion," he said.
He also noted that Sebi's own interim order used qualified language. "They themselves have said, we assume, we suspect that this is their business. So, this has to be clarified. Basically, nothing as harsh as they have come out with it." On the rationale of inflating revenues, Mehta argued that such manipulation served no purpose for a company. "No company will inflate their revenues. If anybody wants to inflate, they will inflate their bottom line. They will inflate their profit to get some benefits. If they have alleged or observed an inflation of top line, which is absolutely no use for anybody," he said.
He further said full revenue disclosure was mandated by law. "If Sebi permits us, I will remove the whole top line. But how can I do that? Because the law wants me to show what is happening. I am showing that," Mehta said.
Refuting Sebi's allegation that the company funds were routed through personal accounts and promoter-linked entities without adequate disclosure, Mehta said: "Not at all. Not a single penny has been rooted through anything, not a single paise has been taken by the promoter." He added that the company and its promoters were 100 per cent debt-free and had never pledged shares anywhere in the world in the last 40 years.
The June 3 interim order also barred Mehta from buying, selling or dealing in the company's own securities pending further proceedings. On this, he said: "I never trade, and in my life, I have never traded. I am not bothered." On shares hitting the lower circuit after the Sebi order, Mehta said the fall was "temporary" and market-driven, and that prices would recover once the matter was resolved. He said the company was ready for a fresh forensic audit and that its offices and books were open to any inspection at any time.
Asked about the possibility of the interim order being made final, Mehta said he was confident of a favourable outcome.
"There is no worst-case scenario because I am fully confident about the wisdom of Sebi. Once we show them the clarifications, everything will go. I am sure they are not blind people; they are intelligent people. They will pass the order in a correct manner," he said.
His message to shareholders who have seen significant erosion in value was: "The company has done no wrong. The company's books are absolutely clear and clean. I am 100 per cent confident, if not today, within a very short period of time, the shares will go back to their original glory." SEBI could not be reached immediately for comments at the time of filing this report.