Trend

Getting in the backdoor

E-commerce sites are side-stepping FDI norms in retail to pull in funding

Graphic by Sumeet Gupta

The Indian e-commerce market has seen a true explosion over the past few years. Large players such as Flipkart and Myntra have not only made us ‘click and collect consumers’ but have also raised their company valuation to the billion-dollar mark. However, some of the deals are falling foul of Foreign Direct Investment (FDI) regulations. The consolidated FDI policy announced in October 2011 says that FDI in e-commerce companies are allowed only in companies that are engaged in business-to-business (B2B) and not in retail trading.    

This consequently allows for two models of funding. One, where the website is a marketplace that aggregates customers’ orders, while the actual execution is done by a third-party vendor. In this case, the website holds no inventory an

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