LIC STAKE IN RAJESH EXPORTS SPARKS SCRUTINY AFTER SEBI FRAUD PROBE

 LIC STAKE IN RAJESH EXPORTS SPARKS SCRUTINY AFTER SEBI FRAUD PROBE

REGULATOR'S MASSIVE ALLEGATION:

SEBI claims Rajesh Exports inflated 97-99% of its revenue between FY21 and FY25, totaling ₹15.15 lakh crore, and obstructed investigations.

LIC'S INVESTMENT QUESTIONED:

LIC’s 10.8% stake has drawn political criticism, with opposition parties asking if the purchase was influenced by the ruling establishment.

SEBI'S UNPRECEDENTED ₹15.15 LAKH CRORE CHARGE

SEBI’s interim order alleges Rajesh Exports misrepresented almost its entire consolidated revenue between FY21 and FY25, largely through overseas subsidiaries like Valcambi SA. The regulator cited missing records, unverified foreign transactions, and non-cooperation from both the company and its auditors, who failed to provide promised working papers. It has barred Chairman Rajesh Mehta from the securities market, ordered a new forensic audit, and referred audit lapses to the NFRA.

FROM SHAREHOLDER TIP-OFF TO REGULATORY CRACKDOWN

The probe began after a March 2024 shareholder complaint flagged unusually large trade receivables outstanding for over two years. SEBI’s preliminary review led to a formal investigation spanning April 2020 to March 2024, with BDO India appointed as forensic auditor. The findings, described as “egregious and unheard of,” have since wiped out significant shareholder value and triggered a collapse in Rajesh Exports’ share price.

GOVERNANCE CONCERNS GROW:

 Experts say the episode exposes gaps in LIC’s due diligence and highlights systemic risks in institutional investment governance.

POLITICAL AND MARKET FALLOUT FOR LIC

LIC’s 10.8% holding in Rajesh Exports has prompted Congress to question whether the investment was politically influenced, given the scale of alleged fraud. LIC shares fell over 1% following the SEBI order, while Rajesh Exports dropped 5%. The controversy has intensified scrutiny of LIC’s investment decisions, especially its role as a custodian of policyholders’ funds

GOVERNANCE RED FLAGS AND SYSTEMIC LESSONS

Governance experts argue LIC failed to act on red flags and needs stronger due diligence and forensic reviews for investee companies. The case underscores broader concerns about corporate governance, auditor oversight, and institutional investor accountability in India. Analysts warn that other LIC portfolio companies may face similar undiscovered risks if oversight mechanisms are not strengthened.

# YOUR COMPLIANCE PARTNER R V SECKAR, FCS, LLB 79047 19295,