NEW DELHI – India’s Serious Fraud Investigation Office (SFIO) has urged a detailed probe into Xiaomi Technology India Private Limited and its related entities. The recommendation, outlined in a memorandum drafted in May, calls for an examination of fund movements and whether the company obtained the mandatory investment approvals required under India’s stricter foreign‑investment rules introduced after the 2020 border clashes.
Background on Xiaomi’s Indian Presence
China’s Xiaomi once held the top spot in India’s smartphone market, but competition from Apple and Samsung has cut its share. The company now sits at fourth place with roughly a 13% market share, down from 19% earlier, according to Counterpoint Research. Xiaomi’s Indian revenue in 2025 was $2.52 billion, a 40% decline from three years prior.
SFIO’s Specific Concerns
The SFIO memorandum stresses the need to verify the beneficial ownership of foreign investors and any direct or indirect control changes that should have been disclosed and approved. It also proposes testing Xiaomi’s financial statements and auditor reports for material misstatement and recording statements from current and former directors, CFOs, and compliance officers.
Additionally, the agency wants to assess whether Xiaomi exercised “de facto control” over Indian sellers or launch partners while presenting those relationships as arm‑length transactions. The investigation could extend to Xiaomi’s alleged exclusive product launches on e‑commerce platforms such as Amazon and Flipkart, which may run counter to India’s Foreign Direct Investment policy for e‑commerce.
Company Response
In a statement to Reuters, a Xiaomi spokesperson said the firm has not received any notice from the SFIO and affirmed, “We accord paramount importance to the laws of the land and comply with them fully at all times.”
Legal and Regulatory Context
The SFIO, under the Ministry of Corporate Affairs, has the authority to arrest and prosecute corporate fraud. Its proposal now awaits approval from the parent ministry, a process that can take months and may result in the probe proceeding, being halted, or being referred to other agencies.
India tightened its foreign‑investment rules in 2020, requiring prior government approval for any investment by a Chinese entity. Earlier this year, the government relaxed some of those restrictions as diplomatic efforts sought to stabilize relations with Beijing ahead of President Xi Jinping’s planned visit for the BRICS summit.
Previous Legal Challenges
Xiaomi has already faced a major setback with a 55.51 billion‑rupee (approximately $584 million) freeze on its Indian bank accounts since 2022 over alleged illegal remittances, a claim the company denies.
In 2024, India’s antitrust regulator alleged that Xiaomi colluded with Amazon and Flipkart to launch products exclusively online, potentially breaching competition laws. Xiaomi has not commented on that allegation.
Potential Impact
If the SFIO proceeds, the investigation could further affect Xiaomi’s market position and financial health in India, a key growth market for the firm. The outcome may also signal how rigorously India will enforce its foreign‑investment regulations on Chinese companies moving forward.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
