- Serious Fraud Investigation Office (SFIO) recommends probe into Xiaomi's India operations
- Investigation to examine fund movements and compliance with foreign investment laws
- Xiaomi denies receiving any SFIO notice and claims full legal compliance in India
Xiaomi is facing fresh scrutiny in India as the Serious Fraud Investigation Office (SFIO) has recommended an investigation into the Chinese smartphone maker over alleged irregularities in its business model and compliance with foreign investment laws, Reuters reported.
The recommendation could intensify regulatory pressure on Xiaomi, which used to be India's top-selling smartphone brand but has since slipped amid growing competition from Apple and Samsung.
The company is also dealing with tax demands and disputes over royalty payments in India.
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The SFIO has proposed examining the movement of funds within Xiaomi Technology India Pvt. and its related entities.
The investigation would also look into whether the company obtained mandatory government approvals for investments following India's tighter scrutiny of Chinese investments introduced after the deadly border clashes between India and China in 2020.
The proposal is still awaiting approval from the Ministry of Corporate Affairs, the SFIO's parent ministry, a standard process in such cases, according to the report.
Xiaomi Says It Has Not Received SFIO Notice
A Xiaomi spokesperson told Reuters that the company had not received any notice or communication from the SFIO.
The company said it places "paramount importance" on Indian laws and complies with them fully. "We accord paramount importance to the laws of the land and comply with them fully at all times."
The SFIO, India's main agency for investigating corporate fraud, has powers to arrest and prosecute offenders. Its proposal was reportedly based on complaints and inputs received through the government's commerce ministry.
The agency has also called for coordination with other government departments to identify and correlate any overlapping violations, as per the report.
What Will The SFIO Probe Examine?
The 21-point investigation framework outlined in the memorandum includes the scope, methodology and proposed course of action. It allows for company executives to be summoned, if required.
The SFIO also proposed testing Xiaomi's financial statements and auditor reports filed with the Indian government for possible material misstatements. Statements from current and former directors, CFOs and compliance officers could also be recorded.
The development comes ahead of Chinese President Xi Jinping's expected visit to India for the BRICS summit this weekend, as New Delhi and Beijing continue efforts to stabilise relations.
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