Xiaomi Warns of Cash-Flow Risk as Frozen ₹4,820 Crore and Market Share Decline Weigh on India Operations

Chinese smartphone and EV maker Xiaomi has raised fresh concerns in its Q3 disclosures about the prolonged financial and regulatory pressures it faces in India. The company said that multiple investigations related to income tax, customs duties, and foreign-exchange compliance have remained unresolved for nearly three years, with potential outcomes that could significantly affect its financial performance and cash flows.

Regulatory Probes Still Unresolved Since 2021

According to Xiaomi’s latest quarterly report, its Indian unit — Xiaomi Technology India Pvt. Ltd. — has been under scrutiny since December 2021 by several authorities, including the Income Tax Department, the Directorate of Revenue Intelligence (DRI), and the Enforcement Directorate (ED).

The company stated that the conclusions of these legal proceedings could take a long time, and any settlements or judgments may adversely impact its operating results. It also said it is currently not practical to quantify the financial effects of these ongoing matters.

AlsoRead:India Inc’s Cash Buffer Declines for First Time in Three Years as Debt Rises

Frozen Funds Rise to ₹4,820 Crore

As of September 30, 2025, Xiaomi reported that ₹48,202,990,000 (about ₹4,820 crore, equivalent to $544.6 million) remained under restriction in India. This is slightly higher than the ₹4,704 crore frozen at the end of 2024.

The company disclosed that several of its bank accounts have been attached as part of these investigations, and the cases are still at the hearing stage with no resolution in sight.

Authorities have alleged that Xiaomi India wrongly deducted certain costs and expenses, including mobile-phone purchase costs and royalty payments made to overseas entities and group companies.

Despite the scale of the frozen funds, Xiaomi said it has consulted external legal experts and concluded it has valid grounds to contest the allegations. Therefore, the company has not created any material provisions in its Q3 financial statements.

India Becomes Xiaomi’s Only Declining Market in Q3

In its Q3 commentary, Xiaomi highlighted that India was the only major market where it recorded a year-on-year decline during the September quarter. The company’s market share in India slipped 3.2% to 13.4%.

In contrast, regions such as Europe, Latin America, Africa, the Middle East, and Southeast Asia all posted market-share gains. Even China experienced a marginal increase.

Globally, Xiaomi said it ranked among the top three smartphone brands in Q3 with a market share of 13.6%. In China, its smartphone shipments saw another year-on-year increase, reaching a 14.9% market share.

Management Comments on India Strategy

During Xiaomi’s Q3 earnings call on November 18, the company reiterated that while global performance has shown improvement, India remains an exception due to ongoing challenges.

On October 16, Xiaomi India COO Sudhin Mathur told Moneycontrol that global leadership is fully aligned and supportive of Xiaomi’s two-phase India strategy. This includes strengthening high-value smartphones and electronics, followed by targeting accelerated premium and multi-category growth from 2026 onward.

Mathur also dismissed speculation that Xiaomi India had been asked to operate independently or solely on its own profit due to reduced attention from the global headquarters amid regulatory pressures. He clarified that the India business continues to receive strategic support.

Cash Flow Risks and Uncertain Timeline Ahead

Xiaomi said that ongoing legal proceedings could take considerable time to conclude, and the impact of these investigations on its operations and cash flows could be significant. The company added that the prolonged attachment of funds and accounts highlights the continuing uncertainty over its India operations.

The disclosures underscore how regulatory challenges, frozen funds, and a rare market-share decline have combined to make India a standout weak spot in Xiaomi’s global portfolio for the September quarter.

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