Ambuja Cements Limited

Page 1 of 8 COMPETITION COMMISSION OF INDIA Combination Registration No.C-2024/11/1206 4th March 2025 Notice under Section 6(2) of the Competition Act, 2002 given by Ambuja Cements Limited. CORAM: Ms. Ravneet Kaur Chairperson Mr. Anil Agrawal Member Ms. Sweta Kakkad Member Mr. Deepak Anurag Member Order under Section 31(1) of the Competition Act, 2002 1. On 8th November 2024, the Competition Commission of India (Commission) received a notice (Notice), under sub-section (2) of Section 6 of the Competition Act, 2002 (Act), given by Ambuja Cements Limited (Acquirer). The Notice was filed pursuant to the execution of: (a) Share Purchase Agreement dated 22nd October 2024 amongst Combination Registration No. C-2024/11/1206 Page 2 of 8 Acquirer and Promoter Group (including Promoter)1(SPA 1); (b) Share Purchase Agreement dated 22nd October 2024 amongst Acquirer and certain public shareholders of the Target (SPA 2); (c) public announcement to the Open Offer dated 22nd October 2024 (PA), and detailed public statement dated 29th October, 2024 (DPS) in relation to the Open Offer pursuant to and in compliance with the requirements of the Securities and Exchange Board of India (SEBI) (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (as amended) (Takeover Code). 2. In terms of Regulation 14 of the Competition Commission of India (Combinations) Regulations, 2024 (Combination Regulations), vide letters dated 22nd November 2024, 26th November 2024 and 30th December 2024 (RFI), certain information(s) / clarification(s) relevant for the purpose of assessment of the combination were sought from the Acquirer. The responses to the same dated 20th December 2024, 20th January 2025 and 10th February 2025 were received. 3. The Proposed Combination entails the following: a) The acquisition of 46.80% of the issued share capital in Orient Cement Limited (Target) by the Acquirer, including 37.90% held by the current Promoter and Promoter Group and 8.90% from certain public shareholders. b) The execution of SPA 1 and SPA 2 triggers an obligation on the Acquirer to make an open offer under Regulation 3(1) and 4 of the Takeover Code for acquisition of up to 26% of the expanded share capital of the Target (Open Offer). Assuming full acceptance of Open Offer, the shareholding of the Acquirer will stand at 72.8% [hereinafter, Acquirer and Target are referred to as the Parties]. 1 Amita Birla, Chandrakant Birla, Nirmala Birla, Avani Birla, Avanti Birla, Amer Investments (Delhi) Limited, Hindusthan Discounting Company Limited, India Silica Magnesite Works Limited, Jaipur Finance and Dairy Products Pvt. Ltd., National Engineering Industries Limited, Universal Trading Company Limited, Bengal Rubber Company Limited, Central India Industries Limited, Gwalior Finance Corporation Limited, Rajasthan Industries Limited, Ashok Investment Corporation Limited, and Shekhavati Investments and Traders Limited. Combination Registration No. C-2024/11/1206 Page 3 of 8 4. The Acquirer is a public listed company which is a part of the Adani Group. Adani Group Entities act as Promoter Group and hold 67.57% shareholding in the Acquirer. The Acquirer is engaged in the manufacture and sale of grey cement products, including Ordinary Portland Cement (OPC), Pozzolona Portland Cement (PPC), Pozzolana Slag Cement (PSC) and Pozzolona Composite Cement (PCC) in India. The Acquirer (including its subsidiaries) operates 22 integrated cement plants across India, as well as 10 bulk cement terminals and 21 grinding units. 5. The Acquirer and all such entities of the Adani group that meet the Materiality Thresholds2 and also satisfy the definition of “group” as per Explanation (b) to Section 5 of the Act, have been considered as part of the ‘Adani Group’. Adani Group is a global integrated infrastructure players with businesses in key industry verticals such as natural resources, ports, logistics and energy. 6. The Target is a public listed company which is part of CK Birla Group. The Promoter and Promoter Group holds 37.90% shareholding in the Target. It is engaged in the business of manufacturing grey cement like PPC and OPC etc. It has three manufacturing facilities at Devapur (Telangana), Chittapur (Karnataka) and Jalgaon (Maharashtra), with distribution in 10 states across India. The integrated manufacturing facilities cumulatively amount to 8.5 MTPA capacity for manufacturing of cement, 5.6 MTPA capacity for manufacturing of clinker and 138.3 MW of power generation assets consists of Captive Power Plant (CPP) (95 MW), Waste Heat Recovery System (WHRS) (10.1 MW), and solar power (33.2MWdc) through AMP Solar Systems Private Limited (AMP Solar) and Ardeur Renewables Private Limited (Ardeur) SPVs. The Target has also secured a concession from Madhya Pradesh Power Generating Company Limited to set up a 2 MTPA cement grinding unit within the premises of the Satpura Thermal Power Station in Sarni, Madhya Pradesh. 2 In terms of the Competition (Criteria of Combination) Rules, 2024, an entity is considered as an affiliate of a party, if the said party has: (a) shareholding or voting rights of 10% or more in such entity; or (b) a right or ability to have a representation on the board of directors of an entity either as a director or observer; or (c) right or ability to access commercially sensitive information of such entity. (Materiality Threshold). Combination Registration No. C-2024/11/1206 Page 4 of 8 7. It is stated in the notice that both the Acquirer (including its affiliates) and the Target are engaged in the business of manufacture and sale of grey cement products (OPC, PPC, PSC etc.). The Commission in its earlier decisions3 has noted that the two varieties of cement i.e., white cement and grey cement have different product characteristics and end use and therefore, constitute separate relevant product markets. As regards the variants of grey cement, the Commission, in its earlier decisions4, has noted that different varieties of grey cement are considered to be largely interchangeable. Given that Parties exhibit horizontal overlap in the manufacture and sale of grey cement, accordingly, the relevant product market for the purposes of assessment of the Proposed Combination is defined as the market for grey cement. 8. As regards the relevant geographic market(s), the Commission in its earlier decisions5, has noted that cement being a bulk commodity, involves significant transportation costs and, therefore, consumption of cement is generally centred around production clusters and from the perspective of demand and supply, these self-contained areas, having homogeneous conditions of competition, constitute distinct relevant geographic markets for the purposes of competition assessment of a combination. 9. For the purposes of identification of the area that would form part of the relevant geographic market, the Commission, in its decisional practice, has been using the shipments test as postulated by Elzinga and Hogarty (EH Test) and the catchment area analysis. The EH Test aims to identify the areas which can be considered as self- contained and have homogeneous conditions of competition based on the extent of flow of product into/outside a given geographic area. With regard to the thresholds of LIFO (Little In From Outside) and LOFI (Little Out From Inside), what constitutes ‘little’, generally, 25 percent is considered a weak threshold and 10 percent is considered a strong threshold. 3 C-2020/03/734- Nuvoco Vistas/Emami Cement; and C-2024/01/1106 - UltraTech Cement Limited / Kesoram Industries Limited. 4 C-2013/10/135 - UltraTech/Jaypee; C-2014/07/190 – Holcim Limited/Lafarge S.A; C-2015/02/246 – UltraTech/Jaypee; C-2015/08/300 - HeidelbergCement AG; C-2016/04/394 – UltraTech/Jaypee and others. 5 Ibid