India’s Serious Fraud Investigation Office (SFIO) has recommended a detailed investigation into Xiaomi’s business in India over alleged irregularities in its business model and possible violations of foreign investment rules, according to a government document, reported Reuters.
The proposed probe will examine the movement of funds and whether Xiaomi obtained the mandatory approvals for investments in India after the government tightened its scrutiny of Chinese investments in 2020.
The memorandum was prepared in May and is currently being examined by the government, according to a person familiar with the matter.
The SFIO has also proposed examining the ownership and control of Xiaomi’s foreign investors and group companies. The investigation would check whether any direct or indirect ownership, control or changes in control were properly disclosed and approved.
Xiaomi said it has not received any notice or communication from the SFIO and maintains that it complies with Indian laws.
The SFIO is India’s main agency for investigating corporate fraud and has powers to arrest and prosecute offenders.
The proposed investigation covers Xiaomi Technology India Private Limited and its related entities. The recommendation is still awaiting approval from the Ministry of Corporate Affairs, which is the SFIO’s parent ministry.
There is no fixed timeline for such decisions and the process can take months, according to Meghav Gupta, founder of law firm Consecro Law. The ministry can approve the probe, decide not to proceed if it does not find sufficient grounds, or ask another government department to examine the matter.
India introduced stricter foreign investment rules in 2020, requiring prior government approval for investments by Chinese entities. Companies including Xiaomi had said these rules caused delays.
Earlier this year, the government relaxed some of the restrictions as India and China worked towards maintaining peace at the border.
An SFIO probe could add to Xiaomi’s challenges in India.
The company has been unable to overturn the freeze of Rs 5,551 crore in its Indian bank assets by the financial crime-fighting agency since 2022. The freeze relates to alleged illegal remittances, which Xiaomi has denied.
Xiaomi has also lost market share in India. It now holds 13% of the smartphone market, placing it fourth, compared with 19% earlier, according to Counterpoint Research.
Its India revenue stood at $2.52 billion in 2025, down 40% from three years earlier.
The SFIO said its recommendation was based on complaints and inputs received through the government’s commerce ministry. The agency has also proposed coordination with other government departments to examine possible overlapping violations.
The memorandum sets out a 21-point framework covering the scope, methodology and proposed course of the investigation. It also allows for company executives to be summoned if required.
The SFIO has proposed examining Xiaomi’s financial statements and auditor reports filed with the government for possible material misstatements. Statements from current and former directors, chief financial officers and compliance officers may also be recorded.
The proposed investigation also covers Xiaomi’s online sales through Amazon and Walmart-owned Flipkart.
Small offline retailers have accused the two e-commerce platforms of entering into exclusive arrangements with sellers. Such arrangements are prohibited under India’s foreign investment rules for e-commerce, according to the allegations. Amazon and Flipkart have denied them.
In 2024, India’s antitrust agency alleged that Xiaomi was among smartphone companies that worked with the two e-commerce platforms to launch products exclusively online, in breach of competition rules. Xiaomi has not commented on the matter.
The SFIO has proposed further scrutiny of Xiaomi’s arrangements with Indian sellers and launch partners.
The agency will examine whether Xiaomi had effective control over these sellers or partners while presenting the relationships as being between independent entities.
The investigation will also look at whether preferential and exclusive launches of Xiaomi products on selected e-commerce platforms went against the purpose of India’s foreign investment policy for e-commerce companies.