India’s monetary crime watchdog has filed a criticism in opposition to Walmart-backed trend e-commerce big Myntra, alleging the corporate violated international funding guidelines by channeling over $191 million by a related-party scheme that disguised retail operations as wholesale commerce.
This criticism marks the most recent transfer in a broader crackdown by Indian authorities, which beforehand focused Amazon and Flipkart.
On Wednesday, the Enforcement Directorate mentioned the Bengaluru-based trend e-commerce agency violated the International Change Administration Act, referred to as FEMA, by participating in multi-brand retail buying and selling “below the guise of wholesale money and carry,” using a associated entity, Vector E-Commerce, as an middleman to route retail gross sales by a wholesale construction.
India restricts international firms engaged in wholesale enterprise from making direct gross sales to shoppers in an effort to guard native retailers. The legislation additionally limits gross sales to associated group firms to a most of 25%.
Myntra failed to satisfy the situations for working as a wholesale or cash-and-carry enterprise, as all of its gross sales have been made completely to Vector E-Commerce, the company said (PDF).
The company filed the criticism in opposition to Myntra, its associated firms, and their administrators below part 16(3) of the FEMA, 1999.
Myntra controls round half of the nation’s total trend e-commerce market. The corporate can also be progressively increasing its fast commerce service and broadening its attain in high-growth classes, together with residence and residing, in addition to magnificence. The corporate can also be testing the waters in social commerce by partnering with celebrities and bringing on micro-influencers, taking over the likes of Instagram, YouTube, and Amazon’s Reside.
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The criticism comes as Indian officers maintain talks with the Trump administration over a possible commerce cope with the US.
The Modi authorities in New Delhi is reportedly below stress from the Trump administration to grant Amazon and Walmart-owned Flipkart full entry to its $125 billion e-commerce market. The Modi authorities has lengthy been anticipated to launch its e-commerce coverage, however sources beforehand advised TechCrunch that it has been on the again burner, as officers are cautious to not pressure relations with the U.S. authorities.
Nonetheless, Amazon and Flipkart have beforehand confronted investigations by Indian businesses, together with the Enforcement Directorate. One of many current main actions in opposition to the 2 firms was reportedly a raid by the federal company in November on the workplaces of a few of their sellers, who’re accused of violating the nation’s international funding guidelines. In April, the company additionally privately sought gross sales knowledge and different paperwork from smartphone distributors, together with Apple and Xiaomi, as a part of its probe into Amazon and Flipkart.
Responding to the most recent motion, Myntra said that it had not acquired a duplicate of the criticism and supporting paperwork from the authorities however remained “absolutely dedicated to cooperating with them at any level of time.”
“At Myntra, we’re deeply dedicated to upholding all relevant legal guidelines of the land and working with the very best requirements of compliance and integrity,” an organization spokesperson mentioned.
Based in 2007, Myntra was acquired by the Indian e-commerce big Flipkart in 2014 and was later purchased by Walmart as a part of Flipkart’s $1.6 billion acquisition in 2018.
When contacted, a Walmart spokesperson pointed to the assertion issued by Myntra.
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