India’s Serious Fraud Investigation Office has recommended a detailed investigation into Xiaomi’s business operations in the country over alleged irregularities involving its business structure and compliance with foreign investment regulations, according to a government document.
Xiaomi was previously India’s leading smartphone brand, but its share of the market has declined as competition from Apple and Samsung has intensified. The company is also dealing with several tax demands and disagreements involving royalty payments.
The SFIO recommendation calls for an examination of financial transactions and whether Xiaomi obtained the investment approvals required under Indian law. India introduced tighter scrutiny of investments from China after deadly clashes along the countries’ border in 2020.
A person familiar with the matter said the government is currently reviewing the memorandum. The document was prepared in May and has been reviewed by Reuters.
The development comes shortly before Chinese President Xi Jinping is expected to travel to India for a BRICS summit scheduled to take place this weekend.
The memorandum states that a key focus of the proposed investigation should be determining the beneficial ownership of foreign investors and companies connected to the Xiaomi group.
Investigators would examine whether any direct or indirect ownership, control or changes in control were properly disclosed and received the necessary approvals under Indian regulations. The document recommends that SFIO conduct a detailed investigation.
A Xiaomi spokesperson told Reuters that the company has not received any notice or communication from the SFIO. The spokesperson said Xiaomi places great importance on complying with Indian laws and follows the applicable regulations.
The Ministry of Corporate Affairs, which oversees the SFIO, and the SFIO itself did not respond to requests for comment.
The SFIO is India’s primary agency for investigating corporate fraud and has legal powers to arrest and prosecute individuals involved in serious financial wrongdoing.
The proposed investigation involving Xiaomi Technology India Private Limited and related entities still requires approval from the Ministry of Corporate Affairs. Such approval is part of the standard process followed in cases of this nature.