Xiaomi faces intensified regulatory scrutiny in India after the Serious Fraud Investigation Office recommended a detailed probe into the smartphone maker’s business model, fund movements and compliance with foreign investment rules, according to a government memorandum reviewed by Reuters.
The recommendation concerns Xiaomi Technology India Private Limited and related entities, and is awaiting approval from the Ministry of Corporate Affairs, which oversees the SFIO. The ministry can approve the investigation, reject it, or refer aspects of the matter to other government departments. There is no fixed timeline for a decision.
The memorandum said investigators should examine the beneficial ownership of foreign investors and group entities, including whether any direct or indirect ownership, control or change in control was disclosed and approved as required. It also proposed scrutiny of the movement of funds and whether Xiaomi obtained mandatory approvals after India tightened oversight of investments from countries sharing a land border with India.
The SFIO recommended a 21-point investigation framework covering the company’s financial statements, auditor reports and records filed with the Indian government. The proposed inquiry could include statements from current and former directors, chief financial officers and compliance officers, and could test financial filings for material misstatements.
The agency also called for coordination with other government bodies to identify overlapping violations. The memorandum was based on complaints and inputs received through the commerce ministry, according to the document. The Ministry of Corporate Affairs, the SFIO and the commerce ministry did not respond to Reuters’ queries.
A Xiaomi spokesperson said the company had not received any notice or communication from the SFIO. The spokesperson added that Xiaomi attaches the highest importance to Indian law and complies with it fully.
The proposed probe could add to Xiaomi’s existing legal and regulatory difficulties in India. The company has been unable to overturn the freezing of 55.51 billion rupees in Indian bank assets by the financial crime-fighting agency since 2022 over alleged illegal remittances, allegations that Xiaomi denies. It is also dealing with tax demands and disputes involving royalty payments.
The SFIO memorandum separately proposed examining Xiaomi’s arrangements with e-commerce platforms and Indian sellers. Investigators would assess whether the company exercised de facto control over sellers or product-launch partners while presenting those arrangements as operating at arm’s length. The inquiry would also examine whether preferential or exclusive online launches defeated the intent of India’s foreign direct investment policy for e-commerce companies.
In 2024, India’s antitrust regulator alleged that Xiaomi was among smartphone companies that colluded with Amazon and Walmart-owned Flipkart to launch products exclusively online, potentially breaching competition rules. Xiaomi has not commented on that matter, while Amazon and Flipkart have denied allegations that they entered into prohibited exclusive arrangements with sellers.
The proposed SFIO action comes as Xiaomi’s position in India’s smartphone market has weakened. Counterpoint Research data cited by Reuters showed the company with a 13% market share, down from 19% earlier, leaving it in fourth place behind stronger competition from Apple and Samsung. Xiaomi’s India revenue in 2025 was reported at $2.52 billion, 40% below its level three years earlier.
India introduced prior government approval requirements for investments from China in 2020 after deadly border clashes between the two countries. The government relaxed some restrictions earlier this year as New Delhi and Beijing worked to stabilise relations. The Ministry of Corporate Affairs must now decide whether the SFIO will proceed with the detailed investigation.
