New Delhi: it’s business as usual for Xiaomi amid investigations by government agencies for alleged currency violations, with more than seven products slated to launch this month for smartphones and other categories, an industry executive familiar with the company’s operations told ET.
The company is currently awaiting the written order from the Karnataka High Court that has ordered the competent authority under FEMA to hear Xiaomi’s appeals against the enforcement directorate’s order to seize its assets worth more than Rs 5,500 crore. , and issue an appropriate order within 60 days before deciding on the next course of action.
The ED has been investigating the company’s payments to third parties since it was founded in India in 2014, alleging that the company has illegally transferred money to third parties under the guise of royalties. Xiaomi has denied all allegations, maintaining the royalty payments are part of valid legal contracts.
ED’s actions also coincided with the former head of the company in India Manu Kumar Jain transition to a global role in the company, based in Dubai. Xiaomi India appointed Alvin Tsewho led the company’s affairs in Indonesia as the new head of India, with Anuj Sharma returning to the company as Chief Marketing Officer.
The leadership change, the sector director said, has not led to any change in the way the company conducts business in India. It remains a sleek outfit with a strong focus in the government’s ‘Make in India’ efforts. Xiaomi employees are also returning to the company’s Bengaluru office and there has been no fear of layoffs or closure of the company.
The new leadership also recently met a senior minister who asked the smartphone leader to increase exports and deepen India’s supply chain ecosystem and value addition. The minister also asked that all products be data privacy compliant.
The company’s image initially took a hit after news of the probe broke, but that hasn’t hurt sales of its products. Xiaomi’s smartphone market share jumped from 21% in April to 22% in May, according to Counterpoint Research‘s mobile shipment tracker, even though shipments declined 9.4% across the industry over the same period.
The sole judge of Justice SG Pandit accepted the position of the additional attorney general representing ED. The ED attorney said that Chinese smartphone maker Xiaomi prematurely approached the court and ordered the competent authority under FEMA to send both sides to a hearing.
The company now plans to introduce more products on its smartphones and Internet-of-Things ecosystem in July.
While the ED probe has not dampened the minds of the smartphone market leader in India, rising component costs and reduced discretionary spending by price-conscious consumers have propelled the company up the price ladder towards premiumization. The executive said the budget and mid-range smartphone market is not a gain for a company that has already committed to charging no more than 5% profit margin on product sales.
The executive said that even during a recessionary period, with declining discretionary spending, cell phones will remain essential purchases. However, the consumer will then choose: devices that offer higher value for money, which Xiaomi products already offer.