India seizes $725 million in Xiaomi assets in illegal money transfer probe

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India’s Law Enforcement Directorate, a financial crime agency, is investigating the Chinese company’s business practices for alleged violations of India’s foreign exchange laws.

Xiaomi was India’s top smartphone seller in 2021, with a 24% market share. (Reuters)

India has seized $725 million from the local bank accounts of Chinese company Xiaomi Corp after an investigation found the smartphone maker made illegal payments to foreign entities posing as royalty payments .

The Law Enforcement Directorate announced on Saturday that it had seized the assets of Xiaomi Technology India Private Limited.

He said the company paid the foreign currency equivalent of 55.5 billion rupees to three overseas-based entities “under cover of royalty payments”.

One of them is an entity of the Xiaomi group. The payout to two other unidentified and unrelated US-based entities was also for “the ultimate benefit of Xiaomi Group entities”, the agency added in a statement.

“Such huge sums in the name of royalties were paid on the instructions of their Chinese parent group entities,” management said.

Xiaomi said in a statement later on Saturday that it abides by Indian laws and believes that “its royalty payments and statements to the bank are all legitimate and true.”

“These royalty payments that Xiaomi India made were for licensed technologies and IP addresses used in our Indian version products…we are committed to working closely with government authorities to clarify any misunderstandings,” he said. -he adds.

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Under the scanner

Management’s actions against Xiaomi signal scrutiny of the Chinese smartphone maker, whose Indian office was raided in December as part of a separate investigation into alleged tax evasion.

Some other Chinese smartphone markers were also attacked at the time.

Reuters reported on April 12 that former Xiaomi Indian chief Manu Kumar Jain has been called in for questioning as part of the management’s investigation.

Jain, who is now global vice president of Dubai-based Xiaomi, appeared before investigators earlier this month, a source with direct knowledge of the investigation said, asking not to be named due to the sensitivity of the case.

The Law Enforcement Branch also asked the company for details of foreign financing, shareholding and funding patterns, financial statements and information on key company executives.

Xiaomi was India’s top smartphone seller in 2021, with a 24% market share, according to Counterpoint Research. South Korean Samsung was the number two brand with a 19% market share.

Many Chinese companies have struggled to do business in India due to political tensions following a deadly border clash in 2020.

India has cited security concerns in banning more than 300 Chinese apps since then, including popular apps such as TikTok, and has also tightened standards for Chinese companies investing in India.

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Source: Reuters

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