Xiaomi faces fresh India probe over investment rules

By Sohail Khan 9 September 2026, 3:40 pm

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Business News›Industry›Cons. Products›Electronics›India's Serious Fraud Office recommends 'detailed' probe into Xiaomi's business in country

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India's Serious Fraud Office recommends 'detailed' probe into Xiaomi's business in country
Synopsis

India's Serious Fraud Office proposed investigating Xiaomi for alleged business irregularities. The probe would examine fund movements and foreign investment law compliance. This comes amid Xiaomi's ongoing tax and royalty payment disputes in India. The company stated it has not received any official notice from the SFIO. An investigation could further challenge Xiaomi's market position and financial standing.

Supreme Court seeks Customs Department's response on Xiaomi's appeal in evasion case — India’s SFIO recommends detailed probe into Xiaomi’s business, foreign investment compliance

NEW DELHI: India's Serious Fraud Office has recommended Xiaomi be investigated for alleged irregularities in its business model and compliance with foreign investment law, potentially intensifying scrutiny of the smartphone maker, a government document shows.

China's Xiaomi was once India's top-selling smartphone brand but has seen its market share dwindle amid intense competition from Apple and Samsung. It is also battling several tax demands and royalty payment disputes.

Also Read: Huawei launches new foldable smartphone as competition with Xiaomi, Apple heats up

The recommendation from India's Serious Fraud Investigation Office (SFIO) said the investigation should examine movement of funds and whether Xiaomi sought mandatory investment approvals as required after India tightened scrutiny of Chinese investments following deadly border clashes between the two nations in 2020.

A person familiar with the matter said the government is examining the memorandum, which was drafted in May and reviewed by Reuters.

The revelation comes ahead of ‌Chinese President Xi Jinping's ⁠expected visit to ⁠attend a BRICS summit in India at the weekend.

"The most important part of the proposed investigation should be examination of the beneficial ownership of foreign investors and group entities," the memorandum said.

"The investigation should verify whether any direct or indirect beneficial ownership, control, or change in control was disclosed and approved as required…It is recommended that a detailed SFIO investigation be undertaken."

In a statement to Reuters, a Xiaomi spokesperson said the company has not received any notice or communication from the SFIO, adding: "We accord paramount importance to the laws of the land and comply with them fully at all times."

Also Read: India gets ready to build its own Samsung, Vivo or Xiaomi

A spokesperson for SFIO's parent, the Ministry of Corporate Affairs, and the SFIO, did not respond to queries.

The SFIO is India's main agency that looks into corporate fraud and has powers to arrest and prosecute offenders. Its proposal for Xiaomi Technology India Private Limited and its related entities is pending approval from its parent ⁠ministry, which is ‌a standard process in such cases.

"There is no timeline in such cases for the ministry to decide – it can take months. The ministry may not find enough to proceed or can allow SFIO to start the probe. It can also ask other departments to look into the matter," said Meghav Gupta, founder ⁠of Indian law firm Consecro Law.

The stricter foreign investment rules introduced in 2020 required prior government approval for any investment made by a Chinese entity in India, which businesses, including Xiaomi, had said caused delays.

Earlier this year, India's government relaxed some of the restrictions, as New Delhi and Beijing have been working on maintaining peace at the border. Xi's expected visit is viewed as an effort to further stabilise relations.

XIAOMI'S MANY CHALLENGES IN INDIA

For Xiaomi, an SFIO investigation could be another setback. It has been unsuccessful in overturning the financial crime- fighting agency's 55.51 billion rupees ($584 million) freeze of its Indian bank assets since 2022 for alleged illegal remittances, which it denies.

Xiaomi has slid to fourth place in India's smartphone market with a 13% share, a drop from 19% it commanded earlier, according to Counterpoint Research. Its India revenue in 2025 stood at $2.52 billion, 40% lower than recorded three years ago.

The SFIO proposal said the agency was recommending action against Xiaomi based on complaints ‌and inputs received via the government's commerce ministry, which also did not respond to Reuters queries. SFIO also called for "coordination" with other government agencies, saying overlapping violations will be correlated.

The memorandum did not elaborate on the information SFIO had reviewed, but laid out a 21-point investigation framework with scope, methodology and plan of action, including possible summoning of company executives if required.

Financial ⁠statements and auditor reports filed with the Indian government should "be tested for material misstatement", SFIO said, adding that statements of current and former directors, CFOs and compliance officers should also be recorded.

E-COMMERCE SCRUTINY

Brands like Xiaomi have become hugely popular in India through online sales of their products on Amazon and Walmart's Flipkart.

But small brick-and-mortar retailers have repeatedly accused the two e-commerce companies of entering into exclusive pacts with sellers, which is prohibited under India's Foreign Direct Investment (FDI) laws, saying it hurts the smaller offline businesses. Amazon and Flipkart deny the allegations.

In 2024, India's antitrust agency alleged that Xiaomi was among smartphone companies which colluded with the two e-commerce companies to exclusively launch products online, breaching competition laws, Reuters has reported. Xiaomi has not commented on the matter.

The SFIO investigation proposal calls for further scrutiny of Xiaomi on the subject, saying it should be assessed if it had "de facto control" over Indian sellers or launch partners, but represented those arrangements as operating at arm's length.

"The inquiry should specifically cover whether preferential and exclusive launches of Xiaomi products on selected e-commerce platforms …. defeated the intent of the FDI policy applicable to e-commerce (companies)," SFIO said.

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