ED freezes Xiaomi Rs 5551 crore fund, amid rumours company denies it is moving office from India to Pakistan

There is something going on with Xiaomi India’s operations. The company is facing challenges as the ED has frozen its Rs 5551 crore and now it is battling rumours that it is moving its operations out of India.

Just a week after the Directorate of Enforcement (ED), a department of the Indian government that investigates economic crimes, froze Rs 5551 crore held in bank accounts of Xiaomi India, a report on Twitter claimed the company is moving out of India. Preposterously, the tweet by South Asia Index — which aims to tweet news and has a large following — claims that Xiaomi is looking to move its operations out of India and into Pakistan. Xiaomi India called the claims baseless and completely false.

And it is probably because something that sounds preposterous and sensational probably is preposterous. For its claim, the South Asia Index, which is not a verified account, cites no source.

When India Today Tech reached out to Xiaomi India, the company said: "The information mentioned in the tweet is completely false and baseless. Xiaomi entered India in July 2014. In less than a year of our India operations, in January 2015, we embarked on our “Make in India” journey. Today, 99 per cent of smartphones and 100 per cent of smart TVs are manufactured in India As a respected global company, we will take all advised measures to protect our reputation from false and inaccurate claims."

While the claims made from that Twitter account are almost certainly false, it is true that Xiaomi India is facing some challenges due to action initiated by the ED. The Rs 5551 crore is a huge amount of money and its freezing is likely to impact Xiaomi India operations. The company has approached the court against the ED action but so far it has not received any relief.

The ED argues that action against Xiaomi has been initiated under the Foreign Exchange Management Act (FEMA).

Xiaomi says that the money seized by the ED is mostly meant for royalty payments to its hardware partners, most notably Qualcomm, which supplies SoCs used in Xiaomi phones.

"Of the entire Rs 5,551.27 crore Xiaomi India paid to foreign entities, more than 84 per cent were royalty payments made to Qualcomm Group, a third-party US listed company, towards the in-licensed technologies, including Standard Essential Patents (SEPs) and IPs used in our Indian version of smartphones," the company said in a statement. Xiaomi said. "We have studied the order from the Competent Authority and are disappointed with the decision as none of the factual and legal contentions raised by us have been addressed. We believe our royalty payments and statements to the bank are all legitimate and truthful."