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Exclusive India may block the IPO of Chinese investment insurance giant LIC

By: jack an Nov. 22,2021
Four senior government officials and a banker told Reuters that New Delhi wants to block Chinese investors from buying shares in Indian insurance giant Life Insurance Company (LIC), which is about to go public, underscoring tensions between the two countries. The two countries.

State-owned LIC is seen as a strategic asset with more than $500 billion in assets and accounts for more than 60 percent of India's life insurance market. While the government plans to allow foreign investors to participate in what could be the country's largest-ever $12.2 billion initial public offering, it is skeptical of Chinese ownership, sources said.

India has sought to restrict Chinese investment in sensitive companies and sectors, banning a raft of Chinese mobile apps and imposing additional scrutiny on imports of Chinese goods since political tensions between the two countries soared last year after soldiers clashed along the disputed Himalayan border. .

"In the wake of the border conflict, China cannot conduct business as usual. The trust deficit has widened significantly," one of the government officials said, adding that Chinese investment in companies such as LIC could pose a risk.

The sources would not be named because discussions on how to block Chinese investment are ongoing and a final decision has not been made.

India's finance ministry and LIC did not respond to Reuters' request for comment sent via email.

China's foreign ministry said it "hopes that India will provide an open, fair, just and non-discriminatory environment for Chinese companies to do business with their investments, which is also in India's own interests." Mutual benefits.

To address budgetary constraints, Prime Minister Narendra Modi's government hopes to raise 900 billion rupees by selling 5 percent to 10 percent of the LICs in the current fiscal year, which ends in March. The government has not yet decided whether to sell a portion of the shares to raise the entire amount or opt for raising the money in two tranches, sources said.

Under current law, overseas investors are not allowed to invest in LICs, but the government is considering allowing foreign institutional investors to buy 20 percent of LIC products.

Options to discourage Chinese investment in LICs include amending existing FDI laws to add provisions related to LICs or creating new laws specifically for LICs, two government officials said.

They added that the government is aware of the difficulty of checking investments that may indirectly come from China and will try to develop a policy to protect India's security, but will not block overseas investors.

A third option being explored is to bar Chinese investors from being cornerstone investors in IPOs, although that would not prevent them from buying shares in the secondary market, a government official and banker said.

Ten investment banks, including Goldman Sachs (GS.N), Citigroup (CN) and SBI Capital Market, have been selected to handle the offering.
India has put the initial public offering of the country's largest insurer, Life Insurance Corp. of India (LIC), on a fast track, while the privatization of two state-owned banks is mired in procedural problems, two governments and an industry source said.

LIC's IPO will be the largest ever in India, with the government aiming to raise 800 billion to 900 billion rupees ($11 billion to $12.2 billion) from its stake sale.

The government plans to raise 1.75 trillion rupees through the privatization program in the current fiscal year ending in March, one of the sources said.

The two government sources said it has selected 10 investment banks, including Goldman Sachs, Citigroup and SBI Capital Markets, to handle LIC's initial public offering.

The sources declined to be named because they were not authorized to talk to the media.

The potential size of the IPO is expected to be much larger than any precedent in the Indian market," one of the sources said, adding that the LIC IPO is on a fast track as it could help partially meet the budget spending plan.

The government plans to spend Rs 34.83 trillion, including Rs 5.54 trillion in capital expenditure for the current fiscal year.

A ministerial panel called the Strategic Disinvestment Alternative Facility is expected to decide soon on the size of the share sale. Two government sources said it could be about 10 percent, to be sold in two tranches.

Sixteen banks, including seven global banks and nine domestic banks, are already in the running to handle the IPO.

Other selected lenders include JM Financial Ltd, Axis Capital, Nomura Securities, Bank of America Securities, JPMorgan Chase India Private Ltd, ICICI Securities and Kotak Mahindra, said the source, who declined to be named because he was not authorized to speak to the media.

JPMorgan Chase, Citigroup, Bank of America and Goldman Sachs declined to comment, while Nomura Securities, JM Finance, Axis, Kotak and others were not immediately available for comment.

A Treasury spokesman could not immediately be reached for comment.

Roadshows will be held in all major financial centers around the world in the coming months to attract investors, and the government will make every effort to attract retail investors and employees to invest in the company, one of the sources said.

LIC, which has more than 34 trillion rupees ($461.4 billion) in assets, has subsidiaries in Singapore and joint ventures in Bahrain, Kenya, Sri Lanka, Nepal, Saudi Arabia and Bangladesh.

Bank Privatization

The government had previously announced plans to sell at least two state-owned banks in the current fiscal year as part of its privatization program and consolidation of state-owned banks, but has not yet disclosed the names of the banks.

One of the sources, a senior government official with direct knowledge of the matter, said the proposed privatization of the two banks has been slow due to various procedural issues and internal assessments indicating limited investor interest in buying at the desired value.

Another banking source involved in the discussions said that despite the bullish market, there were few takers for the weak banks backed by non-performing loans.

"There have been discussions to sell the banks, but now the thinking has shifted to first looking at monetizing other assets before moving on to the banks," the source said.
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