India's Serious Fraud Investigation Office (SFIO) has recommended a detailed investigation into Xiaomi's business in the country, according to a government memorandum reviewed by Reuters. The proposed scrutiny would examine foreign investment compliance, movement of funds and Xiaomi's relationships with Indian sellers and e-commerce launch partners.
The important distinction is that an SFIO investigation has not yet formally begun. The recommendation is pending approval from the Ministry of Corporate Affairs, and the government can approve it, decline to proceed or ask another department to examine the issues. Xiaomi told Reuters it has not received any notice or communication from the SFIO and said it complies with Indian law.
What the SFIO wants examined
The memorandum lays out a 21-point framework for a possible investigation. A central question is whether direct or indirect beneficial ownership, control or changes in control involving foreign investors and group entities were disclosed and approved as required under India's foreign investment rules.
The proposed work would also examine financial statements and auditor reports for possible material misstatements and could include statements from current and former directors, chief financial officers and compliance officials. The SFIO also recommended coordination with other government agencies where potential violations overlap.
Why foreign investment rules are central
India tightened scrutiny of investments from countries sharing a land border with India in 2020. Investments covered by those rules require prior government approval. The proposed Xiaomi investigation would examine whether mandatory approvals were obtained and how funds moved through the company's Indian operations and related entities.
The development also arrives as India-China ties are under close attention, including a new round of military dialogue along the Line of Actual Control. The timing gives the corporate scrutiny a broader geopolitical context, although the SFIO recommendation itself concerns company and investment compliance.
Xiaomi's online sales model could also be scrutinised
Another proposed line of inquiry concerns Xiaomi's arrangements with Indian sellers and launch partners on e-commerce platforms. The memorandum calls for examining whether Xiaomi exercised de facto control over sellers or partners while those relationships were represented as arm's-length arrangements, Reuters reported.
The inquiry would also look at whether preferential or exclusive online product launches were consistent with the intent of India's FDI policy for e-commerce. Small offline retailers have long argued that exclusive online arrangements disadvantage physical stores. Amazon and Flipkart have denied allegations that their practices violate the rules.
This is not Xiaomi's first regulatory challenge in India
Xiaomi has been fighting a separate freeze of ₹5,551 crore in Indian bank assets since 2022 over alleged illegal remittances. Xiaomi has denied wrongdoing in that matter. The company has also faced tax and royalty-payment disputes.
Its competitive position has changed as well. Counterpoint Research data cited by Reuters puts Xiaomi at about 13% of India's smartphone market, down from 19% earlier and placing it fourth. Reuters reported Xiaomi's India revenue at $2.52 billion in 2025, around 40% lower than three years earlier.
Xiaomi nevertheless continues to sell across several consumer-electronics categories in India. Headline Thread recently covered its Mijia air purifier lineup in India. A formal SFIO investigation, if approved, would therefore matter beyond smartphones because it could examine the structure of the wider India business.
What happens next
The next step belongs to the Ministry of Corporate Affairs. There is no fixed deadline for a decision. Approval would allow the SFIO to proceed with the detailed investigation outlined in the memorandum, while the ministry could also decide there is insufficient basis to proceed or route parts of the matter elsewhere.
Until that decision is made, reports that Xiaomi is already under a new formal SFIO investigation would overstate the situation. What is confirmed is that the agency has recommended one, identified the areas it believes warrant examination and proposed a detailed investigative framework. Xiaomi says it has not been notified by the SFIO and maintains that it complies with Indian law.
