Xiaomi flags cash-flow risk as market share slides, $545 million remains frozen in India probes

The probes relate to alleged irregularities in income-tax compliance, customs duties, and foreign-exchange transactions

Chinese smartphone and EV maker Xiaomi warned in its Q3 disclosures that its long-running regulatory battles in India — spanning tax, customs and foreign-exchange investigations — remain stuck in limbo nearly three years after they began, with outcomes that could significantly impact its financials.

The company also highlighted that India was the sole market globally where Xiaomi’s share contracted during the September quarter.

"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. Quantifying the related financial effects is not practical at this stage," the company said.

According to the company’s latest quarterly report, its Indian subsidiary, Xiaomi Technology India Pvt. Ltd., has been under scrutiny since December 2021 from multiple agencies — the Income Tax Department, the Directorate of Revenue Intelligence (DRI), and the Enforcement Directorate (ED).

The probes relate to alleged irregularities in income-tax compliance, customs duties, and foreign-exchange transactions. As of September 30, 2025, the amount under restriction stood at Rs 4820 crore (about $544.6 million), slightly higher than the Rs 4704 crore frozen at the end of 2024.

“As a result, certain of its bank accounts have been attached and thereby Indian Rupees 48,202,990,000 (equivalent to RMB3,869,736,000) has been considered as restrictive as of September 30, 2025 (December 31, 2024: INR47,042,193,000; equivalent to RMB4,016,462,000). The cases are currently in the hearing stages and not yet concluded,” the company said.

Authorities have issued orders claiming that Xiaomi India wrongly deducted certain costs and expenses, including mobile-phone purchase costs and royalty payments to overseas entities and group companies. As part of the ongoing action, several of the company’s bank accounts remain attached.

Xiaomi said all these matters are still in the hearing stage and far from resolution.

Despite the magnitude of the frozen funds, the company told investors it has, after consulting external legal experts, concluded that Xiaomi India has “valid grounds” to contest the allegations. As a result, it has not set aside any material provisions in its financial statements for the quarter.

The disclosure underscores the prolonged shadow India’s regulatory actions continue to cast over one of Xiaomi’s most important international markets, even as the company pushes forward with its broader global turnaround strategy.

India also stood out as the only major market to record a year-on-year decline in Q3, with Xiaomi’s share slipping 3.2% to 13.4%. While regions such as Europe, Latin America, Africa, the Middle East and Southeast Asia all posted gains — and even China saw a marginal uptick — India was the sole market where Xiaomi’s share contracted during the September quarter.

“Regarding personal devices, in Q3, we ranked among the top three in global smartphone shipments, with a market share of 13.6%. We achieved year-on-year market-share growth in all regions except India. In China, our smartphone shipment saw another year-on-year increase in market share, reaching 14.9%,” the company said during its Q3 earnings call on November 18.

Xiaomi India’s chief operating officer Sudhin Mathur told Moneycontrol on October 16 that the company’s global leadership is “fully aligned and supportive” of the two-phased India strategy — strengthening high-value smartphones and electronics, along with targeting accelerated premium and multi-category growth from 2026 onward.

He also dismissed speculation that the India arm had been asked to operate independently on its own profit due to reduced attention from headquarters amid ongoing legal and regulatory challenges.