Walmart stock (WMT) was looking shabbier today after a financial crime investigation into its fashion business Myntra Designs in India.
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Wholesale Restrictions
Myntra, owned by Flipkart, sells fashion brands on its own e-commerce website. India’s Enforcement Directorate, however, revealed today that Myntra declared it was a wholesaler and received $192 million of foreign investment. But it then sold most of its goods to a group entity that retailed those products to consumers.
Indian laws prohibit foreign wholesalers from selling to consumers.
“Myntra Designs Pvt. Ltd was actually carrying out multi-brand retail trading in the guise of wholesale cash & carry,” the agency said.
E-commerce business is also restricted in India, with foreign-owned companies like Myntra, Amazon (AMZN) and Flipkart allowed to operate marketplaces to connect buyers and individual sellers online, but not to stock goods or offer them directly to consumers.
Flipkart and Amazon have also faced allegations of breaching India’s foreign investment rules.
Trade Talks
Amazon and Flipkart are leading players in India’s e-commerce market, which was estimated to be worth $125 billion in 2024 and is set to top $345 billion by 2030, according to India Brand Equity Foundation.
Although, as can be seen below, India is not one of WMT’s main international destinations, it is targeting further growth in the world’s most populous nation.
Myntra was bought by Flipkart in 2014. Walmart bought a controlling stake in Flipkart in 2018 for $16 billion.
Myntra reported revenues of nearly $600 million in 2023-24, up 15% on the previous year. It said it is “committed to upholding all applicable laws.”
The revelation comes at an interesting time given that restrictions on Walmart and Amazon are believed to be part of the ongoing trade negotiations between the U.S. and India.
Is WMT a Good Stock to Buy Now?
On TipRanks, WMT has a Strong Buy consensus based on 28 Buy ratings. Its highest price target is $120. WMT stock’s consensus price target is $111.33, implying a 16.31% upside.
