Top News

India’s Serious Fraud Investigation Office (SFIO) has recommended a detailed investigation into Xiaomi’s business operations in the country over alleged irregularities in its business model and compliance with foreign investment laws, according to a government document reviewed by Reuters.

The recommendation could intensify scrutiny of the Chinese smartphone maker, which is already facing frozen assets, tax demands and disputes over royalty payments in India.

The SFIO has proposed examining the movement of funds and whether Xiaomi obtained mandatory investment approvals following India’s decision to tighten scrutiny of Chinese investments after deadly border clashes between the two countries in 2020.

A person familiar with the matter said the government is examining the memorandum, Reuters reported earlier.

The development comes ahead of Chinese President Xi Jinping’s expected visit to India for a BRICS summit at the weekend.

SFIO Seeks Scrutiny Of Beneficial Ownership

The SFIO memorandum said the proposed investigation should focus on the beneficial ownership of foreign investors and group entities.

"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."

The proposal covers Xiaomi Technology India Private Limited and its related entities. It is pending approval from the Ministry of Corporate Affairs, the SFIO’s parent ministry, which is a standard process in such cases.

The SFIO is India’s main agency for investigating corporate fraud and has powers to arrest and prosecute offenders.

Government Can Approve Or Reject Proposal

The government is currently examining the SFIO memorandum.

"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.

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

Xiaomi said it had not received any notice or communication from the SFIO.

"We accord paramount importance to the laws of the land and comply with ⁠them fully at all times," a Xiaomi spokesperson said in a statement to Reuters.

India-China Investment Rules In Focus

India introduced stricter foreign investment rules in 2020, requiring prior government approval for investments made by Chinese entities in India. Businesses, including Xiaomi, had said the rules caused delays.

Earlier this year, the Indian government relaxed some of those restrictions as New Delhi and Beijing worked to maintain peace along the border.

Xi’s expected visit is being viewed as an effort to further stabilise relations.

Xiaomi Already Facing Several Challenges

An SFIO investigation could add to Xiaomi’s challenges in India.

The company 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 over alleged illegal remittances. Xiaomi denies the allegations.

The company has also fallen to fourth place in India’s smartphone market, with a 13% share compared with the 19% it previously commanded, according to Counterpoint Research.

Xiaomi’s India revenue stood at $2.52 billion in 2025, 40% lower than it was three years earlier.

The SFIO proposal said the agency was recommending action against Xiaomi based on complaints and inputs received through the government’s commerce ministry, which also did not respond to Reuters queries.

The agency also called for "coordination" with other government bodies, saying overlapping violations would be correlated.

21-Point Framework For Investigation

The memorandum did not detail the information reviewed by the SFIO but laid out a 21-point investigation framework covering its scope, methodology and plan of action.

The framework includes the possible summoning of company executives if required.

The SFIO said financial statements and auditor reports filed with the Indian government should "be tested for material misstatement".

It also said statements from current and former directors, chief financial officers and compliance officers should be recorded.

E-Commerce Arrangements Under Scrutiny

Xiaomi and other brands have built a significant presence in India through online sales on Amazon and Walmart’s Flipkart.

Small brick-and-mortar retailers have repeatedly accused the two e-commerce companies of entering into exclusive arrangements with sellers, which is prohibited under India’s Foreign Direct Investment (FDI) laws. The retailers have said such arrangements hurt smaller offline businesses.

Amazon and Flipkart deny the allegations.

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

The SFIO proposal calls for further scrutiny of Xiaomi’s arrangements with e-commerce platforms. It recommends assessing whether Xiaomi had "de facto control" over Indian sellers or launch partners while representing 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)," the SFIO said.