Lagatar24 Desk
New Delhi, Sept. 22: Political tensions between India and China may lead to India restricting Chinese participation in LIC’s IPO. According to some sources, New Delhi wants to prevent Chinese investors from buying shares in this Indian insurance giant which is all set to go public.
The state-owned LIC is a strategic asset, with assets of more than $500 billion and a market share of more than 60% of India’s life insurance industry. While the government intends to allow international investors to join in what is expected to be the country’s largest-ever IPO, worth up to $12.2 billion, the sources said it is wary about Chinese ownership.
Political tensions between the two nations erupted last year after their soldiers clashed on the disputed Himalayan border, and India has pushed to limit Chinese investment in key companies and areas, as well as prohibit a slew of Chinese mobile apps and increase monitoring of Chinese imports.
” Chinese investment in enterprises such as LIC could be risky. Business with China cannot be usual following the border conflicts. The trust gap has widened dramatically, ” said one of the government officials. The sources did not want to be identified since negotiations on how to limit Chinese investment are still underway and no final decisions have been taken.
Prime Minister Narendra Modi’s administration hopes to collect 900 billion rupees by selling 5% to 10% of LIC, in order to address budget limitations this fiscal year which ends in March. According to sources, the government has yet to decide whether it would sell one tranche of shares in order to raise the complete amount or whether it will sell two tranches.
Under current legislation, no foreign institutional investors are permitted to invest in LIC, but the government is considering permitting foreign institutional investors to purchase up to 20% of the company’s stock.
