Xiaomi could be facing another regulatory challenge in India. The Serious Fraud Investigation Office (SFIO) has recommended a detailed investigation into the Chinese technology company’s Indian operations over alleged irregularities in its business model and compliance with foreign investment rules.
According to a government document reviewed by Reuters, the recommendation covers Xiaomi Technology India and related entities. However, a formal investigation has not yet been approved, with the proposal currently awaiting a decision from the Ministry of Corporate Affairs.According to a government document reviewed by Reuters, the recommendation covers Xiaomi Technology India and related entities. However, a formal investigation has not yet been approved, with the proposal currently awaiting a decision from the Ministry of Corporate Affairs.
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Foreign investments and fund movement under scrutiny
According to a government memorandum drafted earlier this year, the SFIO wants to closely examine how Xiaomi moves its funds and who truly holds beneficial ownership within its corporate structure.
The SFIO reportedly wants authorities to assess the beneficial ownership of foreign investors and group entities and determine whether changes in ownership or control were properly disclosed and approved.
India tightened rules governing investments from neighbouring countries, including China, in 2020, making prior government approval mandatory for certain investments.
The SFIO document reportedly contains a 21-point investigation framework. It proposes examining company financial statements and audit reports for possible material misstatements and could include questioning present and former directors, CFOs and compliance officers.
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Mounting Pressures and Past Headaches
This latest regulatory hurdle is just one of many for a company that once completely dominated the Indian smartphone landscape. Today, Xiaomi has slipped to fourth place with a 13% market share, squeezed by fierce competition and regulatory distractions. Its annual revenue in the country has dropped 40% over the last three years.
The brand is already fighting an uphill legal battle over $584 million in bank assets, which were frozen by Indian agencies in 2022. If this new investigation gets approved, Xiaomi’s relationship with e-commerce platforms and sellers may also come under scrutiny.
The proposed investigation could assess whether Xiaomi exercised effective control over Indian sellers or launch partners while presenting those relationships as independent. It could also examine preferential or exclusive product launches on platforms such as Amazon and Flipkart and whether such arrangements complied with India’s FDI rules for e-commerce.
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What Happens Next?
The SFIO cannot launch this probe on its own; it requires a final green light from India’s Ministry of Corporate Affairs. Legal experts note this approval process could take months, or the ministry could decide there isn’t enough evidence to proceed.
For its part, Xiaomi maintains a business-as-usual stance. A company spokesperson stated they have not received any official communication from the SFIO, emphasizing that they “accord paramount importance to the laws of the land and comply with them fully at all times.”
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