Walmart’s Flipkart and founders face $1.35 bn penalty

India’s Enforcement Directorate agency has asked Walmart’s Flipkart and its founders to explain why they shouldn’t face a penalty of $1.35 billion for alleged violation of foreign investment laws, Reuters reported.
Flipkart India e-commerce
The Enforcement Directorate official said the case concerned an investigation into allegations that Flipkart attracted foreign investment and a related party, WS Retail, then sold goods to consumers on its shopping website, which was prohibited under law.

ED has issued a show cause notice in early July to Flipkart, its founders Sachin Bansal and Binny Bansal as well as current investor Tiger Global, to explain why they should not face a fine of 100 billion rupees ($1.35 billion) for the lapses.

A Flipkart spokesperson said the company is in compliance with Indian laws and regulations.

“We will cooperate with the authorities as they look at this issue pertaining to the period 2009-2015 as per their notice,” the spokesperson added.

The Indian agency does not make public such notices issued to parties during an investigation.

Flipkart and others have around 90 days to respond to the notice. WS Retail ceased operations at the end of 2015.

In 2018, Walmart took a majority stake in Flipkart for $16 billion, its biggest deal ever. Sachin Bansal sold his stake to Walmart at the time, while Binny Bansal retained a small stake.

Flipkart’s valuation doubled to $37.6 billion in less than 3 years at a $3.6 billion funding round in July, during which SoftBank Group reinvested in the company ahead of an expected IPO.