Xiaomi India’s assets worth $725 million have been confiscated by India’s anti-money laundering agency for violating the country’s foreign exchange regulations, in a severe blow to the Chinese phone maker that dominates the Indian smartphone market. Xiaomi India’s bank accounts were seized by the Indian Enforcement Directorate after it was discovered that the business had sent $725 million to three foreign-based organizations “under the pretense of royalty” payments.
“Such vast sums in the name of royalties were paid on the orders of their Chinese parent group organizations,” the report stated. The money was sent to “other two unconnected US businesses” for the “ultimate advantage of the Xiaomi group entities,” according to the agency. Manu Jain, the former CEO of Xiaomi India, was called by the directorate earlier this year to answer questions about tax compliance and corporate structure. Xiaomi has “given deceptive information to the banks when remitting money abroad,” according to the agency, which has been examining Xiaomi and several other Chinese companies since December.
Xiaomi thinks its royalty payments are legitimate since they were made for “in-licensed technology and IPs utilized in our India edition goods,” according to a statement released today. According to market research firm Counterpoint, the corporation controlled 23 percent of the local smartphone market share in the quarter that concluded in March this year, after refreshing its smartphone, smart TV, and tablet portfolios with new models in India earlier this week.
Following India’s ban on Chinese applications due to national security concerns, the company’s popularity has suffered in recent years. Xiaomi rebranded some of its stores in India with “Made in India” banners two years ago for optics reasons, experts say, in an attempt to distinguish itself from its Chinese parent company. In what is the latest standoff between the world’s two most populous nations, the Indian government announced on Monday evening that it was banning 59 Chinese-developed apps over concerns that they were engaging in activities that threatened “national security and defence of India, which ultimately impinges upon the sovereignty and integrity of India.”
ByteDance’s TikTok, which claims India as its largest overseas market; Xiaomi’s Community and Video Call apps; two of Alibaba Group’s apps (UC Browser and UC News); Shareit; CM Browser, Club Factory, which claims to be India’s third-largest e-commerce firm; and ES File Explorer are among the apps that India’s Ministry of Electronics and IT has ordered to be banned. This is the first time that India, the world’s second-largest internet market, has ordered the banning of so many foreign apps. Nearly half of India’s 1.3 billion people use the internet. According to New Delhi, the country’s Computer Emergency Response Team had received several “representations from individuals alleging data security and privacy breaches influencing public order concerns.” “The collection, mining, and profiling of these data by entities antagonistic to India’s national security and defense,” it warned.