SFIO recommends examining Xiaomi’s business in India and compliance with foreign direct investment requirements

The Serious Fraud Investigation Office (SFIO) has recommended an investigation into Xiaomi for alleged irregularities in its business model and compliance with foreign investment laws, potentially increasing scrutiny over the smartphone maker, a government document said.

Chinese company Xiaomi was once the top-selling smartphone brand in India, but its market share has declined amid stiff competition from Apple and Samsung. He is also battling several tax claims and royalty disputes.

An advisory from India’s Serious Fraud Investigation Office (SFIO) said the investigation should look into the movement of funds and whether Xiaomi sought mandatory investment approvals, as required after India tightened controls on Chinese investments following deadly border clashes between the two countries in 2020.

A source familiar with the situation said the government is studying the memorandum, which was drawn up in May and reviewed Reuters.

The revelation comes ahead of Chinese President Xi Jinping’s expected visit to India over the weekend to attend the BRICS summit.

“The most important part of the proposed investigation should be the verification of the beneficial ownership of foreign investors and group enterprises,” the memo said.

“The investigation should examine whether any direct or indirect beneficial ownership, control or changes in control have been disclosed and approved as required… A detailed SFIO investigation is recommended.”

In a statement for ReutersA Xiaomi spokesperson said the company has not received any notification or communication from the SFIO, adding: “We attach utmost importance to the laws of the country and always fully comply with them.”

A spokesperson for SFIO’s parent company, the Ministry of Corporate Affairs, and the SFIO did not respond to questions.

The SFIO is India’s premier agency that investigates corporate fraud and has the power to arrest and prosecute offenders. The company’s proposal for Xiaomi Technology India Ltd and its associated entities is awaiting approval from the parent ministry, which is a standard process in such cases.

“In such cases, the ministry does not have a time frame to take a decision – it could take months. The ministry may not find enough information to proceed or allow the SFIO to initiate an investigation. It may also ask other departments to look into the matter,” said Meghav Gupta, founder of Indian law firm Consecro Law.

Stricter foreign investment rules introduced in 2020 required prior government approval for any investment made by a Chinese company in India, which companies including Xiaomi said caused delays.

Earlier this year, the Indian government eased some restrictions as New Delhi and Beijing work to maintain peace at the border. Xi Jinping’s expected visit is seen as an attempt to further stabilize relations.

Xiaomi’s numerous problems in India

For Xiaomi, the SFIO investigation could be another setback. It has failed to overturn a financial crime agency’s decision to freeze ₹5,551 crore ($584 million) worth of assets of its Indian bank from 2022 for alleged illicit money transfers, which it denies.

Xiaomi has dropped to fourth place in the Indian smartphone market with a share of 13 percent, down from the 19 percent it previously held, according to Counterpoint Research. The company’s India revenues were $2.52 billion in 2025, down 40 percent from three years ago.

The SFIO’s proposal said the agency was recommending action against Xiaomi based on complaints and submissions received through the government’s Commerce Department, which also did not respond to queries. Reuters requests. The SFIO also called for “coordination” with other government agencies, saying duplicate violations would be correlated.

The memorandum did not specify the information that the SFIO reviewed, but outlined a 21-point investigation outline indicating the scope, methodology and action plan, including the possible summons of company executives if necessary.

Financial statements and audit reports filed with the Indian government must be “tested for material misstatements,” the SFIO said, adding that statements of current and former directors, chief financial officers and compliance officers must also be recorded.

E-commerce verification

Brands like Xiaomi have become extremely popular in India with online sales of their products on Amazon and Walmart’s Flipkart.

But smaller retailers have repeatedly accused the two e-commerce companies of entering into exclusive agreements with sellers, which is prohibited under Indian foreign direct investment (FDI) laws, saying it hurts smaller offline businesses. Amazon and Flipkart deny the allegations.

In 2024, India’s competition agency said Xiaomi was among the smartphone companies that colluded with two e-commerce companies to launch products exclusively online, violating competition laws. Reuters reported. Xiaomi has not commented on this issue.

The SFIO’s probe proposal calls for further scrutiny of Xiaomi on the matter, saying it should assess whether it had “effective control” over Indian sellers or launch partners but represented those agreements as operating at arm’s length.

“The investigation shall specifically address whether the preferential and exclusive launch of Xiaomi products on selected e-commerce platforms is contrary to the objectives of the FDI policy applicable to e-commerce (companies),” the SFIO said.

Published September 9, 2026