With the government initiating an inquiry into the alleged financial irregularities by China-owned MG Motor India Pvt Ltd, the company has said its books are maintained as per Indian accounting standards and audited by reputed audit firms.
The response from MG Motor India came a day after reports said the ministry of corporate affairs (MCA) has initiated an inquiry against the local unit of China's state-owned carmaker SAIC Motor Corp Ltd after certain irregularities were found in its books.
Further, the MCA, via the registrar of companies (RoC), has summoned MG Motor India's directors and its auditor Deloitte, seeking clarification on the issues raised by the government department.
"We have been sent a notice seeking clarifications primarily on why we have operational losses basis our annual report for the first year of operations 2019-2020. MG Motor India is a law-abiding, professionally managed company that adheres to the highest standards of compliance and governance and is committed to transparency," MG Motor India said in a statement.
Saying that it fully cooperates with the government authorities, the company said it's in the process of providing the "desired records and information" to the RoC within the deadline.
The MCA is reportedly investigating the company on various aspects, including alleged tax invasion, irregularities in invoicing and shady related-party transactions.
On the MCA's query on MG Motor India reporting an operational loss in its first year of business in India, it said it's impossible for any auto company to be profitable in the very first year of its operations. "This is because of the huge Capex investment required and the long gestation period in a highly competitive market such as India where many multinationals have struggled for decades and have accumulated losses."
Meanwhile, the company said on Tuesday that it has reported 53% rise in retail sales at 4,367 units for October 2022 in India.
The ministry's probe against the Chinese company is part of a larger investigation into the alleged money laundering and tax invasion by Chinese multinationals operating in the country. As per an estimate, the government is investigating around 400-500 Chinese companies operating in India.
In recent months, several raids have been conducted across the premises of companies like Xiaomi Corp, Oppo, and VIVO Mobile Communications. Besides, the government has banned around 300 Chinese mobile apps, including TikTok, a popular video-sharing mobile app.
The ED launched an investigation into the alleged illegal remittances by Xiaomi in February this year. On April 30, it seized a sum of ₹5,551.27 crore deposited in the bank accounts of Xiaomi Technology India Pvt Ltd. On July 5, the ED raided 48 locations across the country over alleged money laundering by Vivo and 23 related firms, including Grand Prospect International Communication Pvt. Ltd. (GPICPL). It alleged that Vivo India remitted ₹62,476 crore – almost 50% of its turnover of ₹1,25,185 crore – out of India, mainly to China. These remittances were made in order to disclose huge losses in Indian incorporated companies to avoid payment of taxes in India, it added. During the same time, the directorate of revenue intelligence (DRI) under FinMin also detected customs duty evasion of around ₹4,389 crore by Oppo Mobiles India Private Ltd.
The government is also investigating the roles of several crypto platforms in India. For example, the ED recently accused India's biggest crypto-exchange WazirX and a few other platforms, of allegedly assisting 16 China-based fintech firms in money laundering. Notably, China itself has banned cryptocurrencies and allied crypto businesses.
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