Life Insurance Corp. of India’s (LIC’s) bid to buy 15% in India International Exchange (IFSC) Ltd (India INX), a stock exchange located in Gujarat’s GIFT City, has been blocked by the insurance regulator over a clause in the Insurance Act that bars insurers from acquiring overseas companies, two people directly aware of the matter said.
The International Financial Services Centre (IFSC) in Gift City is deemed as a foreign territory, although it is located on Indian soil. “The Indian government wants exchanges, depositories at IFSC to have an Indian flavour and have a diversified shareholding that is prevalent in exchanges of the mainboard. As part of this, there was a proposal where LIC could acquire 15% in India INX or NSE IFSC (NSE’s GIFT situated exchange), but the regulator has raised an objection,” one of the two people cited above said, seeking anonymity.
Two exchanges are located at GIFT City-India INX and NSE International Exchange. They are units of BSE Ltd and National Stock Exchange of India Ltd. India INX’s only other big shareholder is ICICI Bank, which owns about 10% stake.
Recently, State Bank of India also announced a plan to acquire a 9.95% stake in India International Clearing Corp. (IFSC) Ltd.
According to the Insurance Regulatory and Development Authority of India (Irdai)’s interpretation, the GIFT or IFSC is a foreign jurisdiction, and thus companies in IFSC are outside India, said the second person, also requesting anonymity.
“No insurer shall directly or indirectly invest outside India the funds of the policyholders,” according to Section 27E of the Insurance Act 2015.
In the case of LIC, the funds belonging to policyholders and shareholders are not bifurcated, which has complicated the problem.
“The exchanges have made some representations to the regulator and LIC, stating that the exchanges are set up under India’s Companies Act, 2013, so technically they are Indian companies and not overseas entities. However, the regulator has not accepted this argument,” said the first person.
