China’s Xiaomi shares dip after Indian authorities seize almost $730mn

Xiaomi shares fell sharply in Hong Kong after Indian authorities accused the world’s second-biggest smartphone maker of making “illegal transfers” and about $730 million in New Delhi’s latest move against a Chinese-owned company confiscated dollars.

India’s Enforcement Directorate, its anti-money laundering and foreign exchange crime division, claimed that Xiaomi’s Indian subsidiary sent Rs 55.51 billion (US$725 million) worth of foreign currency out of the country in violation of India’s strict foreign exchange laws.

Hong Kong-listed Xiaomi shares fell as much as 6 percent to HK$11.46 (US$1.46) before shedding losses on Tuesday morning, the market’s first day of trading since India announced the fall on Friday night had, could compensate.

The directorate, part of India’s Treasury Department, claimed Xiaomi made payments disguised as royalties “at the direction of its Chinese parent company.”

The smartphone maker created a “documentary facade” between “group companies” to send the funds abroad, the Enforcement Directorate said, adding, “The company also provided misleading information to the banks while sending the money abroad.” Has”.

Xiaomi, which has the largest share of India’s smartphone market with more than 20 percent, according to consultancy Counterpoint Research, said the verified payments were “legitimate and truthful”.

“These royalties paid by Xiaomi India were for the in-licensed technologies and IPs used in our Indian version products,” the company said in a Explanation. “It’s a legitimate commercial agreement.”

Xiaomi said it is “committed to working closely with government agencies to resolve misunderstandings.”

India is one of Xiaomi’s most important markets outside of mainland China and has long stood the test of time its international expansion.

Chinese-owned companies have since come under deadly pressure in India border conflicts between nations in 2020 struck diplomatic relations. India has Dozens of apps blocked connected to China, including short-form video platform TikTok.

The action on Xiaomi also underscored how Chinese companies are dominating the Indian smartphone market, one of the fastest growing in the world.

Realme, another Chinese manufacturer, is the second largest smartphone seller in the country, followed by South Korea’s Samsung. Brands from China’s BBK Electronics — Vivo and Oppo — were next in the ranking, according to Counterpoint.

“It looks like it’s going to be a hiccup for Chinese companies, but nothing they can’t overcome,” said Jayanth Kolla, a Bangalore-based telecoms and technology analyst.

The Enforcement Directorate has carried out a number of property seizures against foreign companies in recent months.

Last month, US marketing firm Amway accused it of operating a “pyramid scam.”

Amway Global denied misconduct and said it was “in full compliance with all local and national laws in India”.

Ivan Lam, a smartphone analyst at Counterpoint Research, said the investigation is worrying for investors because it could last up to six months. “Even if it is [cleared up] in three to four months they will be under close surveillance by the authorities,” Lam said.

Sales from India have been more important for the Chinese brand this year due to the disruptions caused by China’s lockdowns in response to Covid-19 outbreaks in the country.

“The Chinese market is down after the lockdowns in Q1 and Q2 and the demand side is very weak now,” Lam said. “India is the second largest market for Xiaomi [after China]so it is very important.”

China’s Xiaomi shares dip after Indian authorities seize almost $730mn Source link China’s Xiaomi shares dip after Indian authorities seize almost $730mn

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