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Xiaomi worries that investigations in India could affect cash flows and operating results

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Chinese smartphone maker Xiaomi on Friday said the ongoing investigations and allegations in India could require a lengthy settlement period, and the company could receive judgments or “enter into settlements that could adversely affect its results of operations or cash flows.”



The company, which recorded a global revenue decline of about 20 percent to $10.31 billion in the June (Q2) quarter, said it “isn’t practical at this stage to quantify” related financial effects (from India studies). .

“Management has reviewed the above matters regarding Xiaomi India taking into account the opinions of professional advisors and concluded: Xiaomi India has valid reasons to respond to the relevant Indian authorities,” the group said in its quarterly financial statement.

In April, the Enforcement Directorate (ED) had said they had seized Rs 5,551.27 crore from Xiaomi India, lying in the bank accounts under the provisions of the Foreign Exchange Management Act, in connection with the company’s illegal outgoing remittances.

Finance Minister Nirmala Sitharaman had informed the Rajya Sabha in the recent Monsoon session that five cases of customs evasion against Xiaomi India have been registered by the Directorate of Revenue Intelligence (DRI).

The company said in its quarterly results that, since December 2021, Xiaomi India has been involved in several investigations and reports initiated by relevant Indian authorities, including the Income Tax Department, the Directorate of Revenue Intelligence and the Directorate of Enforcement “in relation to compliance with relevant regulations on income tax, customs duties and exchange regulations”.

Xiaomi India further received an injunction on 11 August “still restricting certain of its bank deposits, because Xiaomi India improperly deducted certain costs and expenses, including purchase costs of mobile phones and royalties paid to third parties, as well as companies within the Group” .

The government is investigating cases of alleged tax evasion by three Chinese mobile companies: OPPO, Vivo India and Xiaomi.

OPPO Mobiles India Ltd has been notified of a show-cause announcement claiming Rs 4,403.88 crore based on an investigation by the DRI.

The DRI also discovered customs duty evasion of about Rs 2,217 crore by Vivo India.

For Chinese companies that originally tried to turn India into an overseas product processing center, if indeed it is becoming increasingly difficult and unprofitable to operate in the country, then withdrawal from India is also an available option, the state-run Global Times said earlier this month. .

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