On Saturday, India's anti-money laundering agency announced the seizure of assets worth around $725 million from Xiaomi India for violating the country's foreign exchange laws, dealing a severe blow to the Chinese phone maker that dominates the Indian smartphone industry.
The Indian Enforcement Directorate announced that it has seized Xiaomi India's bank accounts after discovering that the business had paid $725 million to three foreign-based organisations "under the pretence of royalty" payments.
"Such vast sums in the name of royalties were remitted on the directions of their Chinese parent group organisations," it stated. The money sent to "other two US-based unconnected organisations" was likewise for the "ultimate benefit of the Xiaomi group entities," according to the agency.
Manu Jain, the former CEO of Xiaomi India, was questioned by the directorate earlier this year for questions about tax compliances and corporate structure.
The directorate, which has been looking into Xiaomi and several other Chinese companies since December, stated that Xiaomi has "given deceptive information to banks while remitting money abroad."
Xiaomi stated today in a statement that it believes its royalties payments are legitimate because they were made for "in-licensed technologies and IPs used in our India edition devices."
According to market research firm Counterpoint, the company, which revamped its smartphone, smart TV, and tablet portfolios with new models in India earlier this week, commanded 23 percent of the local smartphone market share in the quarter that concluded in March this year.
The company's popularity has suffered in recent years as a result of India's ban on Chinese apps due to national security concerns. In terms of optics, Xiaomi repainted several of its stores in India with "Made in India" banners two years ago, a move that analysts claimed was an attempt by the business to separate itself from its Chinese parent firm.
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