Govt may block Chinese investment in LIC IPO as company a ‘strategic asset’, BFSI News, ET BFSI
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The government wants to block Chinese investors from buying shares in Life Insurance Corp (LIC), underscoring tensions between the two nations.
State-owned LIC is considered a strategic asset, commanding more than 60% of India’s life insurance market with assets of more than $500 billion.
India has sought to limit Chinese investment in sensitive companies and sectors, banned a raft of Chinese mobile apps and subjected imports of Chinese goods to extra scrutiny.
“With China after the border clashes it cannot be business as usual. The trust deficit has significantly widen(ed),” a government official said, adding that Chinese investment in companies like LIC could pose risks, according to a report.
Meanwhile, the government is mulling allowing foreign direct investment (FDI) in LIC, a move that would help overseas investors take part in the company’s proposed mega IPO, sources said.
The proposal is under discussion between the Department of Financial Services and the Department of Investment and Public Asset Management (DIPAM).
According to the current FDI policy, 74 per cent foreign investment is permitted under the automatic route in the insurance sector. However, these rules do not apply to the Life Insurance Corporation of India (LIC), which is administered through a separate LIC Act.
Change of rules
As per Sebi rules, both FPI and FDI are permitted under public offer. However, sources said since LIC Act has no provision for foreign investments, there is a need to align the proposed LIC IPO with Sebi norms regarding foreign investor participation.
The Cabinet had in July approved the initial public offering (IPO) of LIC.
The DIPAM had in January appointed actuarial firm Milliman Advisors LLP India to assess the embedded value of LIC ahead of the IPO, which is touted to be the biggest public issue in Indian corporate history.
The government expects to come out with the LIC IPO by the end of the current fiscal. Up to 10 per cent of the issue size would be reserved for policyholders.
The government has already brought in the required legislative amendments in the LIC Act for the proposed IPO.
Deloitte and SBI Caps have been appointed as pre-IPO transaction advisors.
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