India’s Serious Fraud Investigation Office (SFIO) has recommended a detailed investigation into Chinese smartphone manufacturer Xiaomi over alleged business model irregularities and potential violations of foreign direct investment (FDI) regulations.
According to an internal government memorandum reviewed by Reuters, the proposal comes during a crucial period for Xiaomi, which has seen its market dominance in India slip in recent years, alongside diplomatic efforts between New Delhi and Beijing to stabilize relations.
Key Takeaways
- Deepened Regulatory Oversight: The SFIO wants to investigate beneficial ownership structures, fund movements, and compliance with foreign investment rules established after India tightened checks on Chinese investments in 2020.
- E-Commerce Operations Under Scrutiny: Investigators aim to determine whether Xiaomi maintained hidden control over online sellers or used exclusive deals on platforms like Amazon and Flipkart to bypass FDI restrictions meant to protect brick-and-mortar stores.
- Market Challenges: Once India's top smartphone brand, Xiaomi's market share has fallen to 13%, with its 2025 revenue dropping 40% compared to three years prior.
- Awaiting Clearance: The Ministry of Corporate Affairs is reviewing the 21-point investigation proposal and holds full authority to approve, modify, or dismiss the recommended probe.
Context & Company Response
A new fraud investigation would add to Xiaomi's ongoing legal hurdles in India, including a court battle over $584 million in bank assets frozen since 2022 over alleged illegal royalty remittances—charges the company denies.
In response to the report, a Xiaomi spokesperson stated that the company has received no official notice from the SFIO and emphasized that it operates in full compliance with Indian laws.
