India seizes $725M of Xiaomi assets in illegal remittance probe

India has seized $725 million from local bank accounts of China’s Xiaomi Corp after a probe found the smartphone maker made illegal remittances to foreign entities by passing them off as royalty payments.

The Enforcement Directorate said on Saturday it seized the assets from Xiaomi Technology India Private Limited.

It said the firm remitted foreign currency equivalent of 55.5 billion rupees to three foreign-based entities “in the guise of royalty” payments.

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

“Such huge amounts in the name of royalties were remitted on the instructions of their Chinese parent group entities,” the directorate said.

Xiaomi said in a statement issued later on Saturday that it complies with Indian laws and believed its “royalty payments and statements to the bank are all legit and truthful”.

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

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Under the scanner

The directorate’s actions against Xiaomi signal widening scrutiny of the Chinese smartphone maker, whose India office was raided in December in a separate investigation over alleged income tax evasion.

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

Reuters reported on April 12 that Xiaomi’s former India head, Manu Kumar Jain, had been summoned for questioning as part of the directorate’s investigation.

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

The Enforcement Directorate also asked the company for details of foreign funding, shareholding and funding patterns, financial statements and information of key executives running the business.

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

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

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

READ MORE:
India bans 59 Chinese apps including TikTok, WeChat

Source: Reuters

India has seized $725 million from local bank accounts of China’s Xiaomi Corp after a probe found the smartphone maker made illegal remittances to foreign entities by passing them off as royalty payments.

The Enforcement Directorate said on Saturday it seized the assets from Xiaomi Technology India Private Limited.

It said the firm remitted foreign currency equivalent of 55.5 billion rupees to three foreign-based entities “in the guise of royalty” payments.

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

“Such huge amounts in the name of royalties were remitted on the instructions of their Chinese parent group entities,” the directorate said.

Xiaomi said in a statement issued later on Saturday that it complies with Indian laws and believed its “royalty payments and statements to the bank are all legit and truthful”.

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

READ MORE:
China’s top diplomat lands in India for surprise meeting

Under the scanner

The directorate’s actions against Xiaomi signal widening scrutiny of the Chinese smartphone maker, whose India office was raided in December in a separate investigation over alleged income tax evasion.

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

Reuters reported on April 12 that Xiaomi’s former India head, Manu Kumar Jain, had been summoned for questioning as part of the directorate’s investigation.

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

The Enforcement Directorate also asked the company for details of foreign funding, shareholding and funding patterns, financial statements and information of key executives running the business.

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

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

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

READ MORE:
India bans 59 Chinese apps including TikTok, WeChat

Source: Reuters