New Delhi wants to prevent Chinese investors from buying shares in Indian insurance giant Life Insurance Corp (LIC) which is expected to go public, four senior government officials and a banker told Reuters, highlighting tensions between the two nations.
The state-owned LIC is considered a strategic asset, as it controls over 60% of the life insurance market in India with assets of over $ 500 billion. While the government is planning to allow foreign investors to participate in what is likely to be the country's largest IPO worth $ 12.2 billion, it is wary of Chinese ownership, the sources said.
Political tensions between countries escalated last year after their soldiers clashed on the disputed Himalayan border, and since then, India has tried to limit Chinese investment in sensitive companies and sectors, has banned a number of apps. Chinese furniture and subjected to extra controls on imports of Chinese goods.
"With China after the border clashes, it can't be as usual. The confidence deficit has widened considerably (ed)," said one of the government officials, adding that Chinese investments in companies like LIC could carry risks. The sources declined to be identified as discussions are ongoing on how Chinese investments could be blocked and no final decisions have been made. The Indian Ministry of Finance and LIC did not respond to requests for comment sent by Reuters. The Chinese Foreign Ministry and the Ministry of Commerce did not immediately respond to requests for comment. Options to prevent Chinese investment in the LIC include changing the current FDI law with a clause referring to the LIC or creating a new LIC-specific law, two government officials said.
They added that the government was aware of the difficulty in controlling Chinese investments that could come indirectly and would attempt to devise a policy that protected India's security but did not discourage foreign investors. A third option explored is to prevent Chinese investors from becoming key investors in the IPO, a government official and the banker said, although that would not prevent Chinese investors from buying shares in the secondary market.
Ten investment banks including Goldman Sachs, Citigroup, and SBI Capital Market have been chosen to manage the offering.