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However, the proposed SFIO investigation still needs approval from the Ministry of Corporate Affairs. The SFIO memorandum, which was drafted in May and reviewed by Reuters, recommends examining the movement of funds within Xiaomi’s India operations and whether the company obtained mandatory government approvals for investments under rules introduced for Chinese investments. India tightened its foreign investment rules in 2020 following deadly border clashes with China. India and China have been working to maintain peace along their disputed border, and New Delhi has recently relaxed some of the investment restrictions introduced after the 2020 clashes. For Xiaomi, the next step depends on the Ministry of Corporate Affairs.
The Serious Fraud Investigation Office (SFIO) has recommended a probe into alleged irregularities in the Chinese tech company’s business model and compliance with foreign investment rules. The recommendation could add to the scrutiny facing the Chinese smartphone maker, which has already faced tax demands, royalty payment disputes and a case involving the freezing of its Indian bank assets, according to a government memorandum reviewed by Reuters. The changes required prior government approval for investments by Chinese entities in India, which businesses, including Xiaomi, said caused delays. “The most important part of the proposed investigation should be examination of the beneficial ownership of foreign investors and group entities,” the memorandum said. “The investigation should verify whether any direct or indirect beneficial ownership, control, or change in control was disclosed and approved as required…It is recommended that a detailed SFIO investigation be undertaken,” the memo added. The SFIO proposal contains a 21-point investigation framework covering its scope, methodology and plan of action. The agency could summon company executives if required. The SFIO said its recommendation was based on complaints and inputs received through the government’s commerce ministry. It remains pending approval from the Ministry of Corporate Affairs, which oversees the SFIO. A Xiaomi spokesperson told Reuters that the company had not received any notice or communication from the SFIO. “We accord paramount importance to the laws of the land and comply with them fully at all times,” the spokesperson said. The Ministry of Corporate Affairs and the SFIO did not respond to Reuters’ requests for comment. Meghav Gupta, founder of Indian law firm Consecro Law, said the ministry could approve the recommendation, decline to proceed or ask another government department to examine the matter. “There is no timeline in such cases for the ministry to decide – it can take months. It can also ask other departments to look into the matter,” Gupta noted. The Indian Competition Commission charged Xiaomi and other smartphone companies in 2024 with conspiring with two e-commerce platforms to launch their products only through these platforms, which would have amounted to a violation of competition laws. The SFIO proposal calls for investigators to examine whether Xiaomi had “de facto control” over Indian sellers or launch partners while representing those arrangements as being conducted at arm’s length. “The inquiry should specifically cover whether preferential and exclusive launches of Xiaomi products on selected e-commerce platforms …. defeated the intent of the FDI policy applicable to e-commerce (companies),” the SFIO said. The recommendation comes ahead of Chinese President Xi Jinping’s expected visit to India for a BRICS summit at the weekend.
Xiaomi could face a detailed investigation in India. It calls for examining financial statements and auditor reports filed with the Indian government for possible material misstatements. The agency also proposed recording statements from current and former directors, chief financial officers and compliance officers. It also called for coordination with other government agencies to correlate potentially overlapping violations. The recommendation covers Xiaomi Technology India Private Limited and related entities. The ministry may not find enough to proceed or can allow SFIO to start the probe. The ministry’s decision will determine whether the SFIO proceeds with the proposed detailed investigation or handles the matter through other government channels. Get the latest technology news and updates. Download the TOI App.
The company has been unsuccessful in overturning the Enforcement Directorate’s freeze of 55.51 billion rupees ($584 million) in Indian bank assets, imposed in 2022 over alleged illegal remittances. Counterpoint Research data puts Xiaomi at 13% of the country’s smartphone market, down from 19%, leaving it in fourth place. Xiaomi’s India revenue stood at $2.52 billion in 2025, about 40% lower than three years earlier. The SFIO proposal also calls for further scrutiny of Xiaomi’s relationships with e-commerce platforms and Indian sellers.
Xiaomi denies the allegations. The company has also lost market share in India. The proposed investigation comes as Xiaomi deals with other financial and regulatory disputes in the country. The company has sold products in India through platforms including Amazon and Walmart’s Flipkart. Small brick-and-mortar retailers have repeatedly accused Amazon and Flipkart of entering exclusive arrangements with sellers, which they say violate India’s foreign direct investment rules. Amazon and Flipkart deny the allegations.