Myntra Slapped with ₹1,654 Cr ED Notice for FDI Breach
LIFESTYLE
ED accuses Myntra of using shell company to bypass India’s FDI rules; notice could reshape foreign e-commerce operations.
New Delhi, July 26, 2025
In a major crackdown on alleged foreign investment violations, the Enforcement Directorate (ED) has issued a ₹1,654 crore show-cause notice to Myntra, the fashion e-commerce platform owned by Walmart-backed Flipkart. The ED’s Bengaluru zone alleges that Myntra and its associated entities violated India’s Foreign Exchange Management Act (FEMA) by misrepresenting their retail operations as wholesale business in order to unlawfully receive Foreign Direct Investment (FDI).
According to the investigation, Myntra claimed to utilize a compliant cash-and-carry model with 100% FDI and allegedly moved almost all of its merchandise through a related party entity, Vector E-Commerce, which sold directly to customers. The ED suspects that this violated their FDI policy, because wholesale entities cannot sell more than 25% of total goods to a related party entity.
The agencies consider this structure to be a witting evasion of the FDI prohibition on multi-brand retail using Vector as a channel to effect sales to the end consumer. The ED therefore brought charges under Section 16(3) of FEMA against the companies and their directors for materially false declarations to access foreign funds.
This shift is reminiscent of previous actions against e-commerce “giants” such as Amazon and Flipkart, and reflects a continued trend of government running a tighter ship with respect to foreign-funded digital marketplaces. Legal analysts stated that if Myntra is charged, they could face heavy fines made for “systematic” violations. The case could also spark some “wholesale changes” in how foreign operated e-commerce companies structure their operations in India’s “tightly governed” retail sector.
The company has been given a chance to respond prior to the ED taking final action.
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