India Is Likely To Prevent Chinese Investors From Participating In The LIC IPO

Political tensions between the nations erupted last year after their forces fought on the disputed Himalayan Galwan Valley, and since then, India has attempted to limit Chinese investment in critical industries and areas, banned 118 Chinese mobile apps, and increased inspection of Chinese imports. And now, New Delhi wants to bar Chinese investors from purchasing shares in Life Insurance Corp., which is set to go public, according to four senior government officials and a banker, highlighting tensions between the two countries.

With more than $500 billion in assets, the state-owned LIC is regarded as a strategic asset, dominating more than 60% of India's life insurance market. While the government intends to let international investors join in what is expected to be the country's largest-ever IPO, valued up to $12.2 billion, the government is wary about Chinese ownership, according to sources. To address budget limitations, Prime Minister Narendra Modi's administration hopes to collect 900 billion rupees by selling 5% to 10% of LIC this fiscal year, which ends in March.

To prohibit Chinese involvement in LIC, options include modifying the present legislation on foreign direct investment with a LIC-specific clause or enacting a new statute specifically for LIC. Under present legislation, no international investors are permitted to invest in LIC; however, the government is contemplating permitting foreign institutional investors to purchase up to 20% of LIC's offering.