India's Serious Fraud Investigation Office (SFIO) has recommended a probe into Xiaomi's business, including the movement of funds and the company's compliance with foreign investment laws.
India's Serious Fraud Investigation Office (SFIO) has proposed investigating alleged irregularities in Xiaomi's business model and its compliance with India's foreign investment rules. The agency wants to examine the beneficial ownership of foreign investors and related entities, as well as whether Xiaomi disclosed ownership and control and obtained mandatory government approvals. The recommendation, drafted in May, is still pending approval from India's Ministry of Corporate Affairs.
The probe could intensify scrutiny of Xiaomi, which is already facing several challenges from Indian authorities. After deadly border clashes with China in 2020, India tightened rules on Chinese investments, requiring prior government approval. Earlier this year, some restrictions were relaxed as New Delhi and Beijing sought to stabilise relations.
For Xiaomi, an SFIO investigation would be another setback. In 2022, India's financial crime-fighting agency froze 55.51 billion rupees ($584 million) in the company's Indian bank assets over alleged illegal remittances, which Xiaomi denies. The company is also facing tax demands and royalty payment disputes.
Xiaomi's position in the market
Xiaomi, once India's top-selling smartphone brand, has fallen behind rivals including Apple and Samsung. Its market share has dropped from 19% to 13%, while its India revenue stood at $2.52 billion in 2025, down 40% from three years earlier.
SFIO also proposes examining Xiaomi's relationships with major online platforms Amazon and Flipkart. Small brick-and-mortar retailers in India have repeatedly accused the two companies of entering into exclusive pacts with sellers, which is prohibited under India's foreign investment laws. Amazon and Flipkart deny the allegations.
In 2024, India's Competition Commission (CCI) alleged that Xiaomi and other smartphone makers may have colluded with Amazon and Flipkart to exclusively launch new devices on their platforms, potentially breaching competition laws. Xiaomi did not comment on the allegations at the time.
The SFIO proposal calls for examining whether Xiaomi exercised "de facto control" over Indian sellers or launch partners, even if they formally operated independently. The agency also wants to assess whether exclusive launches of Xiaomi products on selected e-commerce platforms violated India's foreign investment rules.
What happens next
The SFIO is India's main agency that looks into corporate fraud and has powers to arrest and prosecute offenders. In Xiaomi's case, the agency has proposed an investigation based on complaints and inputs received via the commerce ministry, and called for coordination with other government agencies where violations overlap.
The 21-point memorandum lays out the scope, methodology and plan of action for the proposed investigation. SFIO recommends that financial statements and auditor reports be tested for material misstatement and that statements from current and former directors, CFOs and compliance officers be recorded if required.
The investigation has not yet been approved. The Ministry of Corporate Affairs can allow SFIO to start the probe, reject the proposal or ask other departments to look into specific matters. There is no fixed timeline for the decision; according to an Indian lawyer, it could take several months.
Xiaomi told Reuters it had not received any notice or communication from the SFIO and "accord[s] paramount importance to the laws of the land and comply[ies] with them fully at all times."
Source: Reuters
