According to foreign media reports, on May 11, India's financial crime enforcement agency formally notified Xiaomi's Indian branch, the company's leader, and three banks. India accuses them of illegally transferring funds abroad, potentially violating the "Foreign Exchange Management Act."
Previously disclosed information indicates that the Indian Central Enforcement Directorate (Enforcement Directorate) has frozen approximately 55.51 billion Indian Rupees (around 4.81 billion RMB) in Xiaomi's bank accounts. This notice suggests that the aforementioned frozen funds could be officially confiscated.
Recently, India's Enforcement Directorate (ED) issued a document on June 9 claiming Xiaomi had allegedly violated the country's "Foreign Exchange Management Act" (FEMA) by "illegally transferring funds to foreign entities". The agency has officially notified Xiaomi Technology India Pvt. Ltd., Xiaomi's Indian branch, several executives, and three banks, including Citibank.
Because of these charges, Indian authorities had previously seized 55.51 billion Rupees from Xiaomi (approximately $6.8 billion, nearly 5 billion RMB). This new notice implies that the aforementioned frozen funds might be confiscated.
The adjudication authority has also issued show-cause notices to Citibank, HSBC, and Deutsche Bank, accusing them of violating clauses 10(4) and 10(5) of the "Foreign Exchange Management Act". These banks allegedly disobeyed the Reserve Bank of India's instructions by allowing foreign remittances in the name of royalties without conducting due diligence or obtaining any potential technology cooperation agreement from the company.
Earlier, the ED seized 5551.27 billion Rupees from Xiaomi Technology India Pvt. Ltd.'s bank accounts under the provisions of the "Foreign Exchange Management Act" of 1999 because the company had made unauthorized remittances abroad under the name of royalties. Under section 37A of the "Foreign Exchange Management Act", the appointed authority confirmed the seizure order. The authority stated that the ED's view is correct. Xiaomi India had illegally transferred an equivalent of 5551.27 billion Rupees in foreign exchange abroad under the name of group entities, violating section 4 of the "Foreign Exchange Management Act" of 1999. According to section 37A of the "Foreign Exchange Management Act", these funds should be seized.
Currently, Xiaomi's Indian branch, Xiaomi Technology India Pvt. Ltd., Xiaomi's Indian CFO Sameer B. S. Rao, former Managing Director Manu Kumar Jain, Citibank, HSBC, and Deutsche Bank have all received the related notice.
In a previous interview, Xiaomi President Lu Weibing acknowledged facing significant challenges in the Indian market, including financial impacts. However, he noted that Xiaomi's operations in India are currently normal and stated, "In the future, Xiaomi will improve the operational efficiency of its business in India. Xiaomi believes in the fairness of Indian judiciary and the legality and compliance of operating in India."
Public information shows that Xiaomi entered the Indian market in 2014. Xiaomi's entrance to the Indian market was swift. In 2014, Xiaomi sold 120,000 phones through online sales within a month of launching the Xiaomi 3 in India, and in just a quarter, Xiaomi's share of the Indian smartphone market reached 1.5%. By 2017, it became the top smartphone brand in India. Canalys research shows that Xiaomi remained the market leader in 2022, with a market share of 20%.
In Q1 this year, Samsung, with a 20% share, held the leading position in the Indian smartphone market for two consecutive quarters. Xiaomi's share significantly dropped in Q1 2023, slipping to third place with a market share of 16%, a 44% year-on-year decline, marking the largest decline in the brand's history. The drop was attributed to weak demand in the sub-10,000 Rupees market segment and Xiaomi's over-reliance on online channels and a confused product mix.
