Companies

In compliance with Indian laws, will cooperate with Enforcement Directorate on notice: Flipkart

PTI New Delhi | Updated on August 05, 2021

The Agency issued a show cause notice of ₹10,600 cr for alleged violation of the foreign exchange law

Walmart-owned Flipkart on Thursday said the company is in compliance with Indian laws, including FDI regulations, and will cooperate with the Enforcement Directorate on the notice sent to the e-commerce major.

The Enforcement Directorate (ED) has issued a show cause notice of ₹10,600 crore to Flipkart and its promoters for alleged violation of the foreign exchange law, official sources said on Thursday.

When contacted, Flipkart said it is in compliance with Indian laws and regulations, including FDI regulations. “We will cooperate with the authorities as they look at this issue pertaining to the period 2009-2015 as per their notice,” Flipkart added. Comments could not be immediately elicited from the founders.

According to sources, the notice under various sections of the Foreign Exchange Management Act (FEMA) was issued to a total of 10 notices last month that includes Flipkart, its founders Sachin Bansal and Binny Bansal among others.

Also read: Enforcement Directorate threatens Flipkart, founders with $1.35 billion fine: Sources

The notice was issued after completion of investigation and the charges include violation of foreign direct investment (FDI) rules and those that regulate multi-brand retail, they added.

The case of alleged FDI rules violation against Flipkart has been under the ED scanner since 2012, and the agency, as per official sources, has found alleged violations of FEMA under various counts including an instance of transfer and issue of security to a person/entity outside India.

Notably, the US-based retail giant Walmart Inc had picked 77 per cent stake in Flipkart for $16 billion in 2018. Its founders and many of its investors had taken a partial or complete exit at that time. Sachin Bansal had exited from Flipkart, selling his about 5.5 per cent stake.

Also read: Flipkart’s Shopsy launches zero-commission marketplace

Last month, Flipkart Group had announced raising $3.6 billion (about ₹26,805.6 crore) in funding led by GIC, Canada Pension Plan Investment Board (CPP Investments), SoftBank Vision Fund 2 and Walmart, valuing the e-commerce giant at $37.6 billion.

With this deal, SoftBank re-entered Flipkart’s cap table. SoftBank had sold its approximately 20 per cent share when Walmart bought a stake in Flipkart. Flipkart, which competes with companies including Amazon and Reliance JioMart in the Indian e-commerce space, has seen significant growth over thepast many years.

Published on August 05, 2021

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