'India probes may adversely affect operating results or cash flows'

NEW DELHI: Chinese smartphone maker Xiaomi on Friday said the ongoing investigations and allegations in India could take a long period of time to settle, and the company could receive judgments or enter into "settlements that may adversely affect its operating results or cash flows".

The company, which registered around 20 per cent drop in its global sales at $10.31 billion in the June quarter (Q2), said that "it is not practical to quantify" related financial effects (of India probes) "at this stage".

"The management assessed the aforesaid matters related to Xiaomi India, taking into consideration opinions from professional advisors and concluded Xiaomi India has valid grounds to respond to the relevant Indian authorities," the group said in its quarterly financial statement.

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

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

The company said in its quarterly results that since December 2021, Xiaomi 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".

Xiaomi India further received an order on August 11, "whereby certain of its bank deposits were continued to be restricted, alleging Xiaomi India has inappropriately deducted certain costs and expenses, including purchase costs of mobile phones and royalty fees paid to third parties as well as companies within the Group".

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

A show-cause notice demanding Rs 4,403.88 crore has been served to OPPO Mobiles India Ltd based on an investigation conducted by the DRI.

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

For Chinese enterprises that originally tried to make India an overseas product-processing centre, if it is indeed increasingly difficult and unprofitable to operate in the country, then withdrawing from India is also an available option, state-run Global Times said earlier this month.