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India likely to block Chinese investment in insurance giant LIC’s IPO -sources By Reuters


© Reuters. FILE PHOTO – A bird flies by the Life Insurance Corporation of India’s logo at one of its New Delhi offices on September 14, 2021. REUTERS/Anushree Fadnavis

By Aftab Ahmed, Manoj Kumar and Nupur Anand

NEW DELHI (Reuters) – New Delhi wants to block Chinese investors from buying shares in Indian insurance giant 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.

The state-owned LIC, which controls more than 60% India’s insurance market and has assets in excess of $500 billion, is considered a strategic asset. The sources claimed that while the government plans to let foreign investors participate in the largest-ever IPO of India, which could be worth $12.2 billion (which is likely), it was wary about Chinese ownership.

After clashes at the Himalayan border, political tensions rose between India and China last year. India sought to restrict Chinese investments in sensitive sectors and companies, and banned several Chinese apps from mobile phones. It also scrutinized Chinese imports.

After the China border clashes, it is not possible to go about business as usual. One government official stated that the trust gap has been significantly increased and added that Chinese investments in companies such as LIC may pose risks.

These sources were not able to identify themselves as ongoing discussions about how Chinese investments might be stopped are ongoing.

Reuters emailed for comments from the Indian finance ministry and LIC but they did not reply. China’s commerce ministry and foreign ministry didn’t immediately reply to requests for comment.

To solve the budget problems, Prime Minister Narendra Modi’s government is looking to raise 900bn rupees by selling 5%-10% of LIC in this fiscal year that ends March. According to sources, the government still has not decided whether it will either sell one tranche to fund the total amount of the shares or split the proceeds into two tranches.

LIC cannot be accessed by overseas investors. The government, however, is looking at allowing institutional foreign investors to acquire up to 20%.

According to two government officials, there are options for preventing Chinese investment in LIC. These include changing the existing law regarding foreign direct investment to add a clause relating to LIC and creating a new law specifically LIC.

According to them, the government is aware of difficulties in monitoring Chinese indirect investments and will try to formulate a policy that protects India’s safety but does not prevent foreign investors.

One government official said that the third option is to bar Chinese investors becoming the cornerstone investors of the IPO. However, this would not stop Chinese investors buying shares on the secondary market.

Ten investment banks including Goldman Sachs (NYSE:), Citigroup (NYSE:) and SBI Capital Market have been chosen to handle the offering.

($1 = 73.8200 Indian rupees)

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