Success goes sour

Inaccurate financial statements could be injurious to stock price

- Vishal Goyal , Swastik Sharma

A company’s public disclosures, including its financial statements and annual reports, are viewed as trusted information sources investors can rely on. But what if the accuracy of these documents comes under a cloud?

While going through a list of stocks that have recently fallen significantly, we came across two companies that made us rethink the accuracy of official financial statements. 

Here are their tales.

Rajesh Exports: All that glitters is not gold

This company deals in the flashy metal that we Indians adore – gold. With a market share of around 35 per cent, it is the world’s largest processor of gold and India’s largest exporter of gold products. But when we checked its financial statements and annual reports, things smelled fishy.

On May 30, 2023, Rajesh Exports released its Q4 FY23 results. Although the company claimed that its financial statements were audited, the auditor’s report was missing. Moreover, it did not disclose its FY22 cashflow statement along with its FY23 numbers. Note that Indian accounting standards require the disclosure of comparative financials.

Given these irregularities, the National Stock Exchange asked for clarification. On July 10, Rajesh Exports re-submitted its results, along with the audit report and comparative cash-flow figures. However, we spotted some discrepancies in the cashflow statement.