Flipkart and Tiger Global have a billion dollar notice to respond to in the next 90 days

• India’s financial investigation agency has been investigating Amazon and Flipkart over the years.
  
• The Enforcement Directorate issued a show-cause notice to both the companies and its founders last month.
  
• Flipkart raised a $3.6 billion round at a valuation of $37.6 billion, a two-fold increase from 2018.

India’s Enforcement Directorate (ED) has reportedly warned Walmart-owned Flipkart and its founders — Sachin Bansal and Binny Bansal — with a $1.35 billion penalty for alleged violation of the country’s foreign investment laws.

According to a Reuters report citing sources it did not name, the financial investigation agency has alleged that after Flipkart got foreign investment, a related party, WS Retail, started selling goods to consumers via the e-commerce platform. This is prohibited under Indian law.

ED has issued show-cause notice to both the companies and its founders last month to explain why they shouldn’t face a penalty of $1.35 billion for allegedly violating India’s foreign direct investment (FDI) policy. Tiger Global, which has been an investor in Flipkart for a decade has also been issued such a notice.

Tiger Global declined to comment on the issue.

A Flipkart spokesperson told Reuters, 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."

One of the sources at Flipkart told Reuters that they have around 90 days to respond to the notice and WS Retail had ceased its operations at the end of 2015.

Flipkart was acquired by Walmart in 2018, after which Sachin Bansal sold off all his shareholdings but Binny Bansal continues to hold some. The company’s valuation has doubled since then, from $16 billion in 2018 to $37.6 billion now.

Last month, the company raised a $3.6 billion round led by Singapore-based GIC, Canada Pension Plan Investment Board (CPP investments), Softbank Vision Fund 2 and Walmart.

DisruptAD, Qatar Investment Authority, Khazanah Nasional Berhad, Tencent, Willoughby Capital, Antara Capital, Franklin Templeton and Tiger Global also participated in the round.

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