Life Insurance Corporation of India’s (LIC) stake in Rajesh Exports, which is facing regulatory scrutiny over alleged large-scale financial misrepresentation, has raised questions about the investment practices of India’s largest institutional investor and the safeguards protecting policyholders’ money.
The Securities and Exchange Board of India (Sebi) on Wednesday ordered an investigation into Rajesh Exports and its Executive Chairman Rajesh Mehta for allegedly misrepresenting financial statements involving transactions worth Rs 15 lakh crore, equivalent to 99.8% of the company’s consolidated revenue during FY21-FY25. The regulator also barred Mehta from dealing in the company’s securities until further orders.
According to Sebi’s interim order, the company allegedly failed to disclose material consolidated financial information, did not make available financial statements of subsidiaries and step-down subsidiaries, misrepresented financial statements in annual reports, falsely claimed investments in a gold mine in Africa, and failed to cooperate with the regulator’s investigation.
Fiduciary Accountability Gaps
As of March 2026, the promoter group led by Rajesh Jasvantrai Mehta held a 54.55% stake in the company, while public shareholders owned the remaining 45.45%. LIC, with a 10.8% stake, is the largest domestic institutional shareholder and has maintained that holding since March 2024.
“LIC has a fiduciary responsibility towards its policyholders, unit holders and shareholders, which now includes retail shareholders as well,” said Shriram Subramanian, Founder and MD of InGovern Research Services. He added that LIC should strengthen its due diligence and forensic review processes for investee companies and exit investments where serious governance lapses are detected.
“It appears LIC has not done that in this case. There could potentially be other companies with similar issues in LIC’s portfolio,” he said.
Synthetic Revenues & Book Inflation
Sebi’s preliminary findings showed that Rajesh Exports wrongly recorded derivatives transactions undertaken by Mehta as its own, booking sales of Rs 11,487 crore and purchases of Rs 11,488 crore. It also incorrectly classified exchange fluctuation gains of Rs 867 crore as revenue from operations and Rs 716 crore as purchases. The probe stems from a shareholder complaint received by Sebi in March 2024, alleging possible financial misrepresentation linked to large trade receivables outstanding for more than two years.
As of March 2026, LIC managed shareholder investments worth Rs 1.51 lakh crore and policyholder investments worth Rs 53.33 lakh crore. Income from investments in the policyholders’ account rose 10% year-on-year to Rs 4.32 lakh crore during the year.
Apart from LIC, foreign portfolio investors, including Bridge India Fund and Schwab Fundamental Emerging Markets Fund, collectively held 14.19% in Rajesh Exports as of March 2026. Retail investors owned 14.55%, while NRI investors held 5.27%. The company’s market capitalisation stood at Rs 3,068 crore.
“Even when Rajesh Exports had a market capitalisation of around Rs 20,000 crore, it attracted little analyst coverage and had virtually no mutual fund ownership. Most of the FPI shareholders were relatively unknown entities. That alone should have prompted deeper scrutiny from an institutional investor like LIC,” Subramanian said.