Xiaomi shares fell dramatically in Hong Kong after Indian officials accused the world’s second-largest smartphone seller of conducting “illegal remittances” and seized $730 million in New Delhi’s latest step against a Chinese-owned firm.

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The Enforcement Directorate, India’s anti-money laundering and foreign exchange crime unit, charged Xiaomi’s Indian business with sending Rs55.51 billion ($725 million) of foreign currency out of the country in breach of India’s tight foreign exchange regulations, reported Financial Times.

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Xiaomi’s Hong Kong-traded shares fell as much as 6% to HK$11.46 (US$1.46) before recovering on Tuesday morning, the market’s first trading day since India announced the lawsuit on Friday evening. According to the directorate, which is part of India’s finance ministry, Xiaomi paid payments disguised as royalties “on the directions of its Chinese parent group.”

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According to the enforcement directorate, the smartphone maker used a “documentary façade” among “group entities” to transport the funds outside, and “the company also gave misleading information to the banks while remitting the money abroad.”

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According to consultancy Counterpoint Research, Xiaomi has the largest share of India’s smartphone market with more than 20%, and the payments under scrutiny were “legit and truthful.”

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“These royalty payments that Xiaomi India made were for the in-licensed technologies and IPs used in our Indian version products,” the company said in a statement. 

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“It is a legitimate commercial arrangement.” Xiaomi said it was “committed to working closely with government authorities to clarify any misunderstandings”. 

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Outside of mainland China, India is one of Xiaomi’s most significant markets, and it has long maintained the company’s worldwide development.

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Because of the disruption caused by China’s lockdowns in reaction to Covid-19 outbreaks in the country, sales from India were more essential for the Chinese brand this year.