India's Serious Fraud Investigation Office (SFIO) has called for a full-scale investigation into Xiaomi Technology India and its associated entities. The recommendation, drafted in May and awaiting approval from the Ministry of Corporate Affairs, targets alleged discrepancies in the smartphone maker's business operations and adherence to foreign investment guidelines.
The SFIO's proposal emphasizes scrutinizing fund movements and verifying whether Xiaomi secured necessary government approvals for investments, particularly after India tightened rules on Chinese investments following the 2020 border clashes. A key aspect of the proposed probe will be to examine the beneficial ownership of foreign investors and group entities, ensuring all direct or indirect ownership changes were properly disclosed and approved.
Xiaomi has stated that it has not received any official communication from the SFIO regarding this matter. A company spokesperson affirmed Xiaomi's commitment to upholding Indian laws and complying with them at all times.
This potential investigation adds to existing challenges for Xiaomi in India. The company is already contesting a $584 million freeze on its Indian bank assets, imposed by a financial crime agency in 2022 over alleged illegal remittances, which Xiaomi denies. It also faces ongoing disputes related to tax demands and royalty payments.
According to Counterpoint Research, Xiaomi's share of the Indian smartphone market has declined significantly, dropping from 19% to 13%, placing it fourth. Its India revenue in 2025 stood at $2.52 billion, a 40% reduction from three years prior.
The SFIO's memorandum, based on complaints and inputs from the commerce ministry, suggests a 21-point investigation framework. This includes:
- Examining financial statements and auditor reports for material misstatements.
- Recording statements from current and former directors, CFOs, and compliance officers.
- Assessing Xiaomi's online sales arrangements to determine if it exercised "de facto control" over Indian sellers or launch partners, despite presenting these as independent operations.
- Scrutinizing preferential or exclusive product launches on specific e-commerce platforms to ascertain if they circumvent India's FDI policy for e-commerce.
The SFIO, India's primary corporate fraud investigation agency, possesses powers to arrest and prosecute offenders. The agency has also called for coordination with other government bodies to identify and address any overlapping violations.