Winning Bizness Desk

Mumbai. The Enforcement Directorate (ED) has filed a case against Myntra Designs Private Limited and its associated companies for allegedly violating the Foreign Exchange Management Act (FEMA). The case involves suspected misuse of foreign funds amounting to ₹1,654 crore. The probe focuses on irregularities in the use of foreign direct investment (FDI) and retail operations that allegedly go against Indian regulations.

Accusations of Illegal Retail Activities

According to ED sources, Myntra and its partner companies were reportedly operating multi-brand retail businesses under the name of wholesale cash-and-carry. This is in direct violation of India's FDI policy, which imposes restrictions on foreign investment in multi-brand retail. These operations could result in serious legal consequences if found guilty.

Financial Records Under Scrutiny

Officials from the ED have begun examining various documents and financial statements of Myntra. The objective is to determine whether the company misused foreign funds or bypassed investment regulations. The financial investigation will check for any signs of money laundering, tax evasion, or unauthorized business activities.

What is FEMA and Why it Matters

FEMA, short for the Foreign Exchange Management Act, is a law that governs the use of foreign currency and foreign investments in India. It ensures that neither individuals nor companies misuse foreign money for activities like money laundering or tax evasion. The law provides a framework for all foreign exchange transactions and empowers ED to investigate and penalize violations.

Myntra is Owned by Flipkart

Myntra is a subsidiary of Flipkart, which acquired it in 2014 for ₹2,000 crore. At the time of acquisition, Myntra offered around 15,000 products from 1,000 brands. Even after becoming part of Flipkart, Myntra has continued to operate as an independent platform. The ownership structure has remained unchanged since the acquisition.

Myntra’s Rapid Growth and Customer Base

Myntra has built a strong customer base in the Indian e-commerce market. According to media reports, the platform has around 4 crore (40 million) customers who have made transactions. In the financial year 2021-22, Myntra recorded an operational revenue of ₹3,501 crore. This revenue rose by 25% in FY 2022-23, reaching ₹4,375 crore, indicating robust growth.

Key Highlights in a Nutshell:

• ED filed a FEMA violation case against Myntra over ₹1654 crore worth of foreign fund misuse.
• Myntra and its allies allegedly ran multi-brand retail under the guise of wholesale.
• FDI misuse is being examined for legal breaches.
• ED is checking financial documents and foreign transaction records.
• FEMA regulates foreign investments and prevents money laundering or tax evasion.
• Flipkart acquired Myntra in 2014 for ₹2,000 crore but allowed it to operate independently.
• Myntra has around 4 crore users and saw 25% revenue growth in FY 2023.