India’s Serious Fraud Investigation Office (SFIO) has recommended a detailed investigation into Xiaomi’s business in the country, according to a government document reviewed by Reuters. The memorandum, drafted in May, flags possible irregularities in Xiaomi’s business model and its compliance with India’s foreign investment law.
What the SFIO Wants to Investigate
The recommendation lays out a 21-point investigation framework covering Xiaomi Technology India Private Limited and related entities. It calls for examining the movement of funds, whether Xiaomi obtained mandatory investment approvals required since India tightened scrutiny of Chinese investments after the 2020 border clashes, and whether the company had “de facto control” over Indian sellers or launch partners while presenting those arrangements as arm’s length.
The memorandum states that financial statements and auditor reports filed with the Indian government should “be tested for material misstatement,” and that current and former directors, CFOs, and compliance officers could be summoned to record statements.
“The most important part of the proposed investigation should be examination of the beneficial ownership of foreign investors and group entities.”
That line comes directly from the SFIO memorandum, as quoted by Reuters. The document is pending approval from the Ministry of Corporate Affairs, SFIO’s parent body, a standard step before any formal probe can begin.
The E-Commerce Angle
A separate part of the recommendation asks the SFIO to examine whether preferential and exclusive Xiaomi product launches on select e-commerce platforms undermined India’s FDI policy for e-commerce companies. This echoes a 2024 allegation from India’s antitrust agency that Xiaomi was among smartphone makers that colluded with Amazon and Flipkart to sell products exclusively online, in breach of competition law. Xiaomi has not commented on that separate matter.
Xiaomi’s Response
A Xiaomi spokesperson told Reuters the company has not received any notice or communication from the SFIO, adding:
“We accord paramount importance to the laws of the land and comply with them fully at all times.”
The SFIO, the Ministry of Corporate Affairs, and India’s commerce ministry did not respond to Reuters’ queries.
A Company Already Under Pressure in India
This recommendation lands on top of an existing dispute: Xiaomi has been unable to overturn a freeze on ₹55.51 billion ($584 million) of its Indian bank assets, in place since 2022 over alleged illegal remittances, which the company denies.
The business context has also shifted sharply. Xiaomi has slipped to fourth place in India’s smartphone market with 13% share, down from 19% previously, according to Counterpoint Research. Its 2025 India revenue stood at $2.52 billion, 40% lower than three years earlier. For a company that once dominated India’s budget and mid-range segments, that is a steep fall, and it is the backdrop against which this new SFIO recommendation is arriving.
Reuters also connects the timing to Chinese President Xi Jinping’s expected visit to India this weekend for a BRICS summit, noting the visit is seen as part of an effort to stabilize India-China relations that have been strained since 2020.
What Happens Next
Legal experts caution that a recommendation is not the same as an actual investigation. “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.
For now, nothing changes for Xiaomi customers in India. But the case is worth watching alongside the asset freeze and the antitrust allegations, since together they point to sustained regulatory pressure on one of the country’s largest smartphone brands at a time when its market position is already weakening.
Source: Reuters, via Deccan Chronicle
