SFIO recommends investigation into Xiaomi’s India business over alleged irregularities: Report

The Serious Fraud Investigation Office (SFIO) has recommended an investigation into Xiaomi Technology India and related entities over alleged irregularities in the smartphone maker’s business model and compliance with foreign investment rules, according to a government document reviewed by Reuters.

The recommendation, drafted in May and currently pending approval from the Ministry of Corporate Affairs, calls for scrutiny of the movement of funds and whether Xiaomi obtained mandatory government approvals for investments after India tightened rules on Chinese investments following the 2020 border clashes.

"The most important part" of the proposed investigation should be an examination of the beneficial ownership of foreign investors and group entities, the memorandum said. It recommended verifying whether direct or indirect ownership, control or changes in control were disclosed and approved as required.

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A person familiar with the matter told the news agency that the government is examining the memorandum. SFIO is India’s main agency for investigating corporate fraud and has powers to arrest and prosecute offenders.

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

The proposed probe could add to Xiaomi’s challenges in India. The company has been unable to overturn a $584 million freeze of its Indian bank assets imposed by the financial crime-fighting agency in 2022 over alleged illegal remittances, which Xiaomi denies. It is also facing tax demands and royalty payment disputes.

Xiaomi’s share of India’s smartphone market has fallen to 13%, placing it fourth, from 19% previously, according to Counterpoint Research. Its India revenue was $2.52 billion in 2025, 40% lower than three years earlier.

The SFIO memorandum said its recommendation was based on complaints and inputs received through the commerce ministry. It called for coordination with other government agencies to correlate overlapping violations.

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The proposed 21-point investigation framework includes examining financial statements and auditor reports for material misstatements and recording statements from current and former directors, CFOs and compliance officers. Company executives could also be summoned if required.

The probe would also examine Xiaomi’s online sales arrangements. SFIO said it should assess whether Xiaomi exercised "de facto control" over Indian sellers or launch partners while presenting those arrangements as operating independently.

The memorandum specifically calls for scrutiny of preferential or exclusive launches of Xiaomi products on selected e-commerce platforms and whether these arrangements defeated the intent of India’s FDI policy for e-commerce.