- Tuesday, February 25, 2025
By: Shubham Ghosh
INDIA aims to block investors from China from buying shares in its insurance giant Life Insurance Corp (LIC) which is set to go public, Reuters exclusively reported citing some senior officials in the Narendra Modi government. The revelation brought to the fore again the underscoring tensions between the two nuclear neighbours.
LIC commands more than 60 per cent of India’s insurance market with assets more than $500 billion. The government is planning to permit foreign investors in what could become the country’s biggest-ever IPO worth a potential $12.2 billion, it is cautious to keep Chinese ownership at bay, Reuters added citing the sources that refused to be identified.
The reason being “trust deficit”.
“With China after the border clashes it cannot be business as usual. The trust deficit has significantly widen(ed),” one of the government officials said, adding that Chinese investment in companies like LIC could pose risks to India.
India and China saw their political relations plummeting last year after their troops clashed in the disputed Himalayan border. India banned several Chinese apps in the aftermath besides seeking to limit Beijing’s investment in sensitive companies and sectors. Even imports of Chinese goods were brought under added scrutiny.
Discussions are also reportedly underway on how Chinese investment might be blocked even though no final call has been taken on the matter. India’s finance ministry and LIC did not respond to Reuter’s request to comment on the matter.
China, however, hoped that India will give its companies an open and fair investment and business environment.
“It is hoped that India will provide an open, fair, just and non-discriminatory investment and business environment for Chinese companies, which is also in India’s own interests,” China’s foreign ministry said, adding economic and trade cooperation between China and India was mutually beneficial, the report added.
The Narendra Modi government is hoping to resolve budget constraints by selling five to 10 per cent of LIC this financial year to raise rupees 900 billion. Under the current law, no overseas investors can invest in LIC but the government is considering allowing foreign institutional investors to buy upto 20 per cent of LIC’s offerings.
According to some government officials, one option to prevent Chinese investment in LIC is by amending the current law on foreign direct investment with a clause that related to LIC or setting up a new law specific to LIC, Reuters added.
The Indian government would try to adopt a policy to protect the country’s security but not stop overseas investors. Also, Chinese investors could be stopped from becoming cornerstone investors in the IPO, one government source said, the Reuters report added, even though that would not prevent Chinese investors from buying shares in the secondary market.
