Shares of Life Insurance Corporation of India declined about 1% after market regulator SEBI barred Rajesh Exports and promoter Rajesh Mehta from the securities market in an interim order alleging revenue discrepancies worth Rs 15.15 lakh crore. The regulatory action has drawn attention to LIC's 10.8% stake in Rajesh Exports.
SEBI's investigation, triggered by a shareholder complaint and supported by a forensic audit, questioned revenues underpinning almost the entirety of Rajesh Exports' consolidated sales between FY21 and FY25. The regulator has alleged a revenue mismatch of Rs 15.15 lakh crore and cited missing records, undisclosed subsidiary financial statements and lack of cooperation during the probe. The investigation remains ongoing.
Canara Bank's connection stems from its lending relationship with Rajesh Exports. The bank classified its exposure to the company as a stressed asset after repayment defaults, with total dues standing at about Rs 509 crore. LIC's exposure through Canara Bank is also in focus, as the insurer owns a 5.85% stake in the bank.
Earlier this year, the lender initiated a process to sell the stressed loan through an auction route. A public notice was issued on May 4, bids were invited until May 22 and an anchor bidder was expected to be identified by May 27. However, the bank abruptly cancelled the sale process on May 7 without disclosing reasons.
SEBI's order highlights several obstacles encountered during the forensic audit. According to the regulator, Rajesh Exports failed to provide critical customer and vendor records, while financial statements of key subsidiaries were allegedly not disclosed. The forensic review was further hampered by missing documentation, inconsistent submissions and what SEBI described as a lack of cooperation during parts of the investigation.
Rajesh Exports will have an opportunity to respond before any final determination is made. A final order could potentially lead to monetary penalties, disgorgement of gains and longer market-access restrictions.
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