NEW DELHI, Sept 10: The Serious Fraud Investigation Office (SFIO) has recommended a detailed investigation into the Indian operations of Chinese smartphone manufacturer Xiaomi, according to a government document reviewed by Reuters.
The proposed probe will examine whether the company complied with India’s foreign investment regulations, particularly rules introduced or tightened following the deterioration in India-China relations after the 2020 border clashes.
The agency has proposed examining the movement of funds, ownership structures, regulatory approvals and compliance with foreign direct investment requirements.
The memorandum reportedly contains a 21-point framework outlining the proposed scope and methodology of the investigation. It also calls for scrutiny of financial statements and auditor reports filed with Indian authorities to determine whether there were any material discrepancies.
The inquiry could also examine statements from current and former company executives, including directors, chief financial officers and compliance officers.
The agency has suggested coordination with other government bodies where areas of investigation overlap.
Another area under scrutiny is the company’s e-commerce business. The proposed investigation could examine Xiaomi’s arrangements with online platforms and sellers, including exclusive product launches on Amazon and Flipkart.
India’s competition authorities have previously examined allegations involving smartphone manufacturers and exclusive online product launches. Xiaomi has faced scrutiny over whether such arrangements could conflict with regulations governing foreign investment in e-commerce.
Xiaomi has not received an official notice regarding the proposed investigation, according to the Reuters report, but the company has maintained that it complies with Indian laws.
The proposal still requires approval from the Ministry of Corporate Affairs before a formal investigation can proceed.
The development comes as Xiaomi faces increasing competition in India’s smartphone market. The company, which was once the country’s leading smartphone brand, has slipped in market share amid growing competition from Apple, Samsung and other manufacturers.
The proposed inquiry could add to the regulatory challenges facing the company as it seeks to strengthen its position in one of the world’s largest smartphone markets.