India Likely to Block Chinese Investment in LIC’s IPO: Report
New Delhi: New Delhi wants to block Chinese investors from buying shares in Life Insurance Corp (LIC) which is due to go public, four senior government officials and a banker told Reuters, underscoring tensions between the two nations.
State-owned LIC is considered a strategic asset, commanding more than 60% of India's life insurance market with assets of more than $500 billion. While the Union government is planning to allow foreign investors to participate in what is likely to be the country's biggest-ever IPO worth a potential $12.2 billion, it is leery of Chinese ownership, the sources said.
Political tensions between the countries rocketed last year after their soldiers clashed in Eastern Ladakh and since then, India has sought to limit Chinese investment in sensitive companies and sectors, banned a raft of Chinese mobile apps and subjected imports of Chinese goods to extra scrutiny.
Also read: China Shoots Back Over Latest App Ban, Raises Question of US-India Collusion
"With China after the border clashes it cannot be business as usual. The trust deficit has significantly widen(ed)," said one of the government officials, adding that Chinese investment in companies like LIC could pose risks.
The sources declined to be identified as discussions on how Chinese investment might be blocked are ongoing and no final decisions have been made yet.
India's finance ministry and LIC did not respond to Reuters emailed requests for comment. China's foreign ministry and commerce ministry did not immediately respond to requests for comment.
Aiming to solve budget constraints, Prime Minister Narendra Modi's administration is hoping to raise Rs 900 billion through selling 5% to 10% of LIC this financial year which ends in March. The government has yet to decide on whether it will sell one tranche of shares seeking to raise the full amount or choose to seek the funds in two tranches, sources have said.
Also watch | The Wire Business Report: 'Blanket Ban on FDI From China May Hit Investment Hard'
Under current law, no overseas investors can invest in LIC but the government is considering allowing foreign institutional investors to buy up to 20% of LIC's offering.
Options to prevent Chinese investment in LIC include amending the current law on foreign direct investment with a clause that relates to LIC or creating a new law specific to LIC, two of the government officials said.
They added that the government was conscious of the difficulty in checking on Chinese investments that could come indirectly and would attempt to craft a policy that would protect India's security but not deter overseas investors.
A third option being explored is barring Chinese investors from becoming cornerstone investors in the IPO, said one government official and the banker, although that would not prevent Chinese investors from buying shares in the secondary market.
Ten investment banks including Goldman Sachs, Citigroup and SBI Capital Market have been chosen to handle the offering.
(Reuters)
This article went live on September twenty-third, two thousand twenty one, at twenty-one minutes past two in the afternoon.The Wire is now on WhatsApp. Follow our channel for sharp analysis and opinions on the latest developments.
