Style Under Scrutiny: ED Tailors FDI Case Against Myntra in ₹1,654 Cr Stitch-Up

Myntra, India's top fashion online portal, is in the eye of a storm after the Enforcement Directorate (ED) lodged a formal complaint of suspected contravention of foreign direct investment (FDI) regulations of ₹1,654 crore. The latest action is to draw attention to rising regulatory heat on the business of internet companies funded by the foreign.

Key Highlights:
ED Files FEMA Case against Myntra: The company has filed a FEMA complaint against Myntra, its directors, and related parties for illegally concealing multi-brand retailing under the cover of wholesale trade.

Modus Operandi Violation: Myntra has been accused of channeling bulk sales by group company Vector E-Commerce Pvt. Ltd., which in turn sold directly to customers. Such an arrangement is accused of masking direct-to-customer (B2C) sales as wholesale (B2B), allowing Myntra to channel FDI banned under prevailing standards for multi-brand trading in retail.

Policy Violation Description: FDI policy rules that no more than 25% wholesale turnover can go to group companies. ED claims that Myntra has crossed this limit under FEMA Section 6(3)(b) and related FDI policy changes.

Industry Impact: The investigation follows wider government suspicion that online retailing giants are sidestepping Indian FDI curbs by employing intricate corporate structures.

Company Stand: Myntra refutes wrongdoing and asserts that its operations are in conformity with applicable laws, with a vow to cooperate with authorities.

Source: Economic Times, India Today, Moneycontrol, Republic World