India's Serious Fraud Investigation Office has recommended a detailed investigation of Xiaomi's business model and foreign investment compliance, a memo reviewed by Reuters shows.

The memo, drafted in May, focuses on how funds moved and whether Xiaomi got the investment approvals India requires.

India tightened scrutiny of Chinese investment after deadly border clashes with China in 2020. Many such investments now need prior government approval.

The memo says the probe should examine the beneficial ownership of foreign investors and group entities, and whether changes in control were approved.

"It is recommended that a detailed SFIO investigation be undertaken," the document says.

A Xiaomi spokesperson said the company had received no notice from the SFIO and complies with Indian laws at all times.

The government is examining the memo, and no formal investigation has been announced.

Xiaomi was once India's top-selling phone brand, but Apple and Samsung have eaten into its share. It is also fighting tax and royalty disputes.

Read the full article for more on the proposed Xiaomi probe.