Rajesh Exports Ltd (REL), gold refiner, manufacturer and exporter, has recently come under criticism due to serious lapses in its regulatory and exchange filings. It claims to be the largest processor of gold globally, processing around 35% of the world's gold. The Rs17,000 crore market-cap company, which posted revenue of Rs3.4 lakh crore in FY22-23, has faced questions regarding the absence of key reports and financial statements in its announcements.
Investors are closely tracking the audit report and comparative cash-flow statements, which were missing when REL released its FY22-23 and Q4FY22-23 results. These omissions raise suspicions and cast doubts on the company's adherence to financial reporting standards. According to Ind-AS 1, comparative financial statements, including the balance sheet, P&L statement and cash-flow statement, must be submitted to provide insights into the preceding year.
More governance issues were highlighted in a twitter thread by Beat the Street which is an investment community dedicated to identifying red flags in Indian companies. It highlighted about company's exchange communications which stated that there were no related party transactions for FY22-23, which is surprising considering REL's subsidiaries, including REL Singapore PTE, step-down subsidiary Valcambi S.A, and associated entity Babal Rayan Jewellery.
In its FY21-22 annual report, Rajesh Exports incompletely filed Form No. AOC.1, failing to include Part "B": Associates and Joint Ventures, despite having an associate company. This omission further raises concerns about the company's compliance and transparency.
The financial market has taken notice of and raised concerns over the lack of the audit report and key financial components in the filing of audited results for the year ending March 2023. The omission, according to a senior corporate official quoted in the media, was unintentional, and the company is ready to provide the audit report on request from the exchanges.
According to PL Venkatadri, partner at BSD & Co, the statutory auditor for REL, the firm has delivered and signed the audit report. They are unaware if the corporation has submitted it along with the results to the stock exchanges. The failure to submit audit reports not only raises concerns about corporate governance but also violates the regulations stated in the Companies Act 2013 and Ind-AS 1, which mandate the disclosure of audit reports and comparative financial statements.
Non-compliance with such norms can result in penalties, including the freezing of the promoter's entire shareholding if the company fails to pay the penalty. Such regulatory breaches have implications for REL and its reputation in the market.
Rajesh Exports has always been a mysterious company, with low employee costs, overseas offices, huge turnover (Rs339,690 crore) and Rs1,432 crore of profit for FY22-23 but pays only 3% as tax. It does not hold conference calls with analysts and investors.