Xiaomi weighs settlement to recover ₹4,704 crore frozen assets in India

China’s Xiaomi Corporation said it is weighing settlement option to recover ₹4,704 crore seized by the Enforcement Directorate (ED) from Xiaomi Technology India Pvt Ltd, the local arm of the Chinese tech giant.

Since December 2021, Xiaomi Technology India has been involved in various investigations and notifications initiated by relevant Indian authorities including the Income Tax Department, the Directorate of Revenue Intelligence and the Directorate of Enforcement in relation to compliance of relevant income tax regulations, custom duties regulations as well as foreign exchange regulations, respectively.

“In this connection, Xiaomi India received orders alleging that it has inappropriately deducted certain costs and expenses, including purchase costs of mobile phones and royalty fees paid to overseas third parties as well as companies within the Group. As a result, certain of its bank accounts has been attached and thereby India Rupees (INR) 47,042,193,000 (equivalent to RMB 4,016,462,000) has been considered as restrictive as of December 31, 2024. The cases are currently in the hearing stages and not yet concluded,” the smartphone maker said in its annual results announcement.

“Conclusions of legal proceedings, investigations and allegations could take a long period of time, and the Group could receive judgments or enter into settlements that may adversely affect its operating results or cash flows,” the Chinese company said, adding that quantifying the related financial effects is not practical at this stage.

Xiaomi said its management assessed the matters related to Xiaomi India, taking into considerations opinions from professional advisors, and concluded Xiaomi India has valid grounds to respond to the relevant Indian authorities. “The Group, hence, has not made any material provision as of December 31, 2024 pertaining to these matters,” it said.

Xiaomi’s smartphone shipments decreased 0.9% from 43.1 million units in the third quarter of 2024 to 42.7 million units in the fourth quarter of 2024, primarily due to the decrease in smartphone shipments in the fourth quarter of 2024 in India resulting from the enhanced promotional efforts for the Diwali Festival in India in the third quarter of 2024, partially offset by the increase in smartphone shipments in mainland China resulting from the launch of new products in the fourth quarter of 2024.

In April 2022, the Enforcement Directorate seized a sum of ₹5,551.27 crore deposited in the bank accounts of Xiaomi Technology India. The seizure was made under the provisions of Foreign Exchange Management Act, 1999 in connection with the alleged illegal outward remittances made by the company, the probe agency said. The company has remitted foreign currency equivalent to ₹5,551.27 crore to three foreign based entities which include one Xiaomi Group entity in the guise of royalty.

Xiaomi India has not availed any service from the three foreign based entities to whom such amounts have been transferred, the investigating agency said. "The company also provided misleading information to the banks while remitting the money abroad," it alleged.

Chinese smartphone maker, however, claimed that over 84% of the ₹5,551.27 crore seized by the Enforcement Directorate were royalty payments made to chipmaker Qualcomm Group for intellectual property (IP) used in Indian smartphones.

In January 2022, the Directorate of Revenue Intelligence (DRI) stated that Xiaomi Technology India evaded customs duty to the tune of ₹653 crore between 2017 and 2020 by under-evaluation.