The Enforcement Directorate has filed a case under the Foreign Exchange Management Act (FEMA) against Myntra Designs Pvt Ltd and its directors, alleging an FDI violation worth ₹1,654 crore. The issue stems from Myntra allegedly masking retail operations as wholesale to sidestep regulatory caps on foreign investment.
Myntra Designs Pvt Ltd, is a leading Indian fashion e-commerce company and a fully owned subsidiary of Flipkart, which itself is controlled by U.S. retail giant Walmart. Known for offering a wide selection of lifestyle and fashion products online, Myntra operates in one of the most tightly regulated sectors when it comes to foreign direct investment (FDI).
The Enforcement Directorate (ED) has now initiated proceedings under Section 16(3) of the Foreign Exchange Management Act (FEMA), alleging that Myntra received ₹1,654.35 crore in foreign direct investment under the automatic route by misrepresenting its business model as “cash & carry wholesale trading,” which allows 100% FDI.
The ED claims that Myntra routed the majority of its inventory to a related group entity, Vector E‑Commerce Pvt Ltd, which then sold goods directly to retail consumers. This structure—effectively converting wholesale inflow into a multi-brand retail operation—is at the heart of the alleged violation. As per FEMA regulations, any wholesale trading firm cannot sell more than 25% of its goods to a single group entity, a threshold Myntra is believed to have far exceeded.
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Additionally, under India’s FDI policy, 100% foreign investment is permitted in B2B e-commerce. However, in the case of multi-brand B2C retail, FDI is tightly capped at 51%, and that too with significant regulatory conditions including local sourcing norms. By reportedly bypassing these restrictions through indirect sales to consumers, Myntra is said to have contravened key provisions of FEMA Section 6(3)(b) and the associated policy framework laid out by the Department for Promotion of Industry and Internal Trade (DPIIT).
The ED has submitted its findings to the adjudicating authority and a show-cause notice is expected soon. If proven, the case could lead to financial penalties and reputational risk for both Myntra and Flipkart, especially amid heightened government scrutiny over e-commerce compliance and foreign ownership.
In response, Myntra has issued a preliminary statement indicating that it has not yet received a formal notice from the ED but is fully committed to cooperating with authorities. The company also emphasized that it operates in compliance with all applicable Indian laws and maintains transparent records of its business operations.
This development comes at a time when Myntra had reported profitability for FY24 and was actively expanding its private-label brands, partnerships, and influencer-led campaigns. The case could pose challenges to Myntra’s near-term strategic positioning, especially if it delays future funding or regulatory approvals for new business verticals.
The e-commerce sector in India has seen increasing regulatory attention in recent years, with similar FEMA scrutiny earlier applied to other players operating under complex group structures. As India tightens the enforcement of its FDI norms in digital retail, this case could set a precedent for how online platforms with foreign backing conduct business.
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