India likely to block Chinese investment in LIC, IPO, amidst rising political tensions

 The Center wants to prevent Chinese investors from buying shares in the Indian insurance giant Life Insurance Corp (LIC) which must be made public, four senior government officials and a banker told Reuters news agency. State-owned LIC is considered a strategic asset, controlling over 60% of the Indian life insurance market with assets in excess of $ 500 billion. As the government considers allowing foreign investors to participate in what will likely be the country’s largest IPO with a potential value of $ 12.2 billion, it is wary of Chinese ownership, the officials said. sources.

Political tensions between the countries exploded last year after their soldiers clashed at the Himalayan border and since then India has sought to limit Chinese investment in sensitive companies and sectors, a series of ‘Chinese mobile applications and subjected imports of Chinese products to further scrutiny. However, no final decision in this regard has been taken and it is not yet clear how India can stall Chinese investment in LIC as it might need modifying the current law on foreign direct investment, the report said. 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," Reuters reported quoting two government officials. There is a third option in which Chinese investors might be barred from becoming cornerstone investors in the IPO but that would not prevent Chinese investors from buying shares in the secondary market.