The Serious Fraud Investigation Office recommends an in-depth inquiry into the Chinese smartphone maker over foreign investment compliance and e-commerce practices.
India’s Serious Fraud Investigation Office (SFIO) has advised a formal probe into smartphone manufacturer Xiaomi over alleged operational irregularities and breaches of foreign investment regulations, according to a government document seen by Reuters.
The proposal urges investigators to trace financial flows and check whether Xiaomi secured compulsory approvals required for Chinese investments. India tightened these rules following border clashes between the two nations in 2020. Earlier this year, India relaxed some of these restrictions following the rapprochement between Beijing and New Delhi.
A government source confirmed that officials are currently reviewing the memorandum, which was drafted in May.The proposal was based on the complaints and inputs given by the commerce ministry.
The document highlights the need to scrutinize the beneficial ownership of foreign investors and group entities to ensure all direct or indirect control changes were declared and approved.
Xiaomi told Reuters it has not received any notification from the SFIO, adding that it strictly adheres to all local laws. Neither the SFIO nor the Ministry of Corporate Affairs responded to requests for comment.
The SFIO, which holds statutory powers to arrest and prosecute corporate offenders, requires approval from the Ministry of Corporate Affairs before launching a formal inquiry. Legal experts note there is no fixed timeline for this decision; the ministry could grant approval, reject the proposal, or refer the matter to other agencies.
A full investigation would mark another hurdle for Xiaomi’s Indian operations. The firm remains locked in a legal dispute over $584 million in bank assets frozen by Indian authorities in 2022 over alleged illegal overseas remittances. The company is also fighting multiple tax and royalty demands.
Xiaomi, once India’s leading smartphone vendor, has seen its market position slip to fourth place with a 13 per cent market share, trailing competitors such as Samsung and Apple. The firm recorded $2.52 billion in Indian revenue in 2025, reflecting a 40 per cent drop over a three-year period.
The SFIO’s 21-point proposed framework suggests examining financial statements for misstatements, questioning current and former executives, and assessing whether exclusive product launches on platforms like Amazon and Flipkart undermined foreign direct investment policies.
