Xiaomi's Legal Battle in India Intensifies as Supreme Court Appeal Looms

Xiaomi appeals a massive customs duty demand in India, threatening its local profits and market share. The case centers on alleged import undervaluation.

The Chinese technology giant Xiaomi is mounting a vigorous legal defense in India, appealing to the country's Supreme Court to overturn a substantial customs duty demand. This high-stakes confrontation places significant financial strain on the company's Indian operations, with the contested amount dwarfing the unit's annual profit and jeopardizing its position in what was once a core market.

Financial Threat to Indian Operations

The scale of the financial penalty poses an existential challenge to Xiaomi's business in India. Market analysts caution that the initial $72 million demand from customs authorities could potentially balloon to more than $150 million when accrued interest and penalties are included. This figure starkly contrasts with the operational performance of Xiaomi India, which reported a profit of just $31.7 million for the 2023–2024 fiscal year.

This dispute compounds existing pressures. Since 2022, approximately $610 million in bank balances has remained frozen as part of separate investigative proceedings. The cumulative regulatory scrutiny has coincided with a dramatic erosion of market share: Xiaomi's portion of the Indian smartphone sector has plummeted from a peak of 31% to a mere 12% as of December 2025.

Core Dispute: Alleged Undervaluation of Imports

The conflict centers on allegations by Indian customs officials that Xiaomi systematically undervalued imported components over several years. The authorities claim the company failed to include royalty payments—such as those made to Qualcomm—in the declared customs value of these goods.

In its appeal to the Supreme Court, Xiaomi contests this characterization. The company's filing argues that the authorities display a fundamental "implicit distrust of the entire contract manufacturing model." Xiaomi contends that because the imports were handled by third parties, it should not be considered the economic owner of the components for customs purposes. The firm has secured support from key manufacturing partners; subsidiaries of industry giants Flex and Foxconn have joined the legal proceedings, echoing concerns over the severity of the potential penalties.

Management Response: Share Buybacks Amid Uncertainty

As the legal battle unfolds in India, Xiaomi's leadership in Hong Kong is taking action to support the company's stock price. The shares are currently trading near €3.82, hovering close to their 52-week low of €3.62.

In a move designed to signal confidence, the company continued its share repurchase initiative, acquiring approximately HK$100 million worth of stock on both February 24 and February 25. While such buybacks aim to provide price support, they are unlikely to fully alleviate fundamental investor concerns regarding the Indian business's future.

The Supreme Court is scheduled to hear the case in April. Meanwhile, investor attention is also turning to March 24, 2026, when the board is set to approve the 2025 annual results and consider a potential dividend declaration.