Bharat Forge Limited

Page 1 of 44 COMPETITION COMMISSION OF INDIA Combination Registration No.C-2024/10/1197 Non- Confidential 22nd April 2025 Notice under Section 6(2) of the Competition Act, 2002 filed by Bharat Forge Limited and AAM India Manufacturing Corporation Private 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 23rd October, 2024, the Competition Commission of India received a notice given by Bharat Forge Limited (BFL/Acquirer) and AAM India Manufacturing Corporation Private Limited (AAMCPL/ Target), under sub-section (2) of Section 6 of the Competition Act, 2002 (Act) [Collectively, BFL and AAMCPL are referred to as ‘Parties’]. 2. The notice is filed pursuant to Share Purchase Agreement (SPA) dated 17th October 2024 entered into amongst BFL, Target, AAM International Holdings, Inc. [wholly owned Combination Registration No. C-2024/10/1197 Page 2 of 44 subsidiary of American Axle & Manufacturing Holdings Inc. (AAM Holdco)], and American Axle & Manufacturing, Inc. (AAM) [wholly owned subsidiary of AAM Holdco]. 3. The notice is filed in relation to the proposed acquisition by BFL of 100% shareholding and full and sole control over AAMCPL [including e-axle assembly lines that AAMCPL will acquire from AAM Auto Component (India) Private Limited (AAM Auto) [Proposed Combination]. Description of the Parties 4. BFL is a listed company incorporated in 1961. It is listed on the National Stock Exchange as well as the Bombay Stock Exchange. It is a global provider of safety and critical components and solutions to various sectors including automotive, railways, defence, construction, mining, aerospace, marine, and oil & gas. BFL is primarily engaged in the manufacture and sale of metal forging products including vehicle components such as certain forged axle sub-components, in India and outside India. BFL and BFL Group entities operate across sectors and industries both in India and in other countries. It has 33 subsidiaries, 1 joint venture, and 2 associate companies in India. In the automotive industry in India, BFL manufactures and sells various metal forged components for vehicles including commercial vehicles and passenger vehicles. Its sales are predominantly institutional sales i.e., sales to Original Equipment Manufacturers (OEMs). 5. Certain promoters of BFL, namely, (a) Babasaheb Neelkanth Kalyani, (b) Amit Babasaheb Kalyani, (c) Sunita Babasaheb Kalyani (BNK Family) ultimately control BFL and its downstream entities. BNK family cumulatively has 32.03% shareholding in BFL. As shareholders, the BNK Family, i.e., Mr. Babasaheb Neelkanth Kalyani, Mr. Amit Babasaheb Kalyani and Ms. Sunita Babasaheb Kalyani, have the same rights as those available to any ordinary shareholder of BFL. Mr. Babasaheb Neelkanth Kalyani is the Chairman and Managing Director of BFL and Mr. Amit Kalyani is the Vice- Combination Registration No. C-2024/10/1197 Page 3 of 44 Chairman and Joint Managing Director of BFL. Therefore, these two members of the BNK Family do have rights such as rights through board presence and information rights, that are not available to ordinary shareholders. 6. BNK Family also has controlling shareholding (through BF Investments) in two joint ventures with Meritor Heavy Vehicle Systems, LLC acquired by Cummins Inc. (Cummins) in 2022 in India i.e., Meritor HVS (India) Limited (MHVSIL) and Automotive Axles Limited (AAL) [collectively, BFL’s Affiliate JVs]. BF Investments’ shareholding in MHVSIL and AAL is 48.99% and 35.52%, respectively. BFL has submitted that the BFL’s Affiliate JVs are not part of BFL Group but are part of the list of entities categorised as ‘BFL Affiliates’ and have been included in the list containing names and business activities of BFL's Affiliates. BFL’s Affiliate JVs are, inter alia, engaged in the manufacture and sale of axles for commercial vehicles, off-highway vehicles, and defence vehicles. In addition to axles, AAL, one of the BFL’s Affiliate JVs, (a) manufactures drum brakes for commercial vehicles which it sells directly to OEMs and also to MHVSIL, the other Affiliate JV; and (b) manufactures and supplies suspension systems/ kit (includes all suspension components) for only one customer1. MHVSIL also manufactures and sells certain components / spares (Such as oil seals and brake linings), primarily to OEMs, and has limited direct aftermarket sales of components/ spares. It is clarified that (a) BFL Group entities, and (b) entities in which BNK Family exercises control, are not present in the e-axle for CV segment in India. 7. The Target is a company incorporated in India. It is an indirectly held wholly owned subsidiary of AAM Auto. Currently, 99.92% of the equity shareholding of the Target is held by AAM International Holdings Inc., which is a wholly owned subsidiary of AAM Holdco. Remaining 0.08% equity shareholding of the Target is held by AAM, AAM Holdco’s wholly owned subsidiary incorporated in Delaware. The Target is primarily engaged in the business of manufacture and sale of axles for commercial vehicles in 1 It is submitted that AAL also manufactures miniscule quantities of sub-components/spares for the replacement market and sales of such sub-components/ spares are only to OEMs and formed approximately 0.15% of its total revenue for F.Y. 2023-24. Combination Registration No. C-2024/10/1197 Page 4 of 44 India. Its sales are predominantly institutional sales i.e., sales to OEMs. The Target houses (i) two manufacturing facilities (one in Maharashtra and one in Tamil Nadu) that primarily manufacture axles for commercial vehicles; and (ii) ‘Pune Engineering and Development Centre’ (Acquired Business). It also houses (i) a ‘Pune Business Office’ which is engaged in the provision of captive IT support and product engineering services, and (ii) components business division that purchases vehicle components and exports the same to other group entities of AAMCPL (as pass-through sales) (Retained Business). Scrutiny of Notice 8. In terms of Regulations 14(2) of the Competition Commission of India (Combinations) Regulations, 2024 (Combination Regulations), BFL vide letters dated 6th November 2024 and 3rd December 2024 was asked to provide complete information and clarifications. BFL filed its complete response on 16th December 2023 and a voluntary submission on 27th December 2024 (BFL’s Responses). 9. In terms of Regulation 14(8) of the Combination Regulations, the Commission sought information from third parties i.e., competitors/Original Equipment Suppliers (OESs) and customers/ OEMs of the Parties vide letters dated 8th January 2025. The Commission received third-party responses from certain competitors / OESs [Competitor Responses] as well as certain customers / OEMs [Customer Responses] of the Parties till 29th January 2025 [collectively, Competitor Responses and Customer Responses are referred to as ‘Third-Party Responses’]. 10. On 04th February 2025, the Commission considered all the material available on record and formed a prima facie opinion that the Proposed Combination is likely to cause appreciable adverse effect on competition in India in the horizontally overlapping relevant market(s) identified below, namely, Axle CV Market, particularly its segment Axle MHCV Market. Accordingly, the Commission directed the Secretary to issue a Show Cause Notice (SCN) to the Parties, under the provisions of sub-section (1) of Section 29 of the Act, to respond in writing, within fifteen days of the receipt of such Combination Registration No. C-2024/10/1197 Page 5 of 44 notice, as to why investigation in respect of the Proposed Combination should not be conducted. Accordingly, SCN was sent to the Parties on 04th February 2025. 11. The Acquirer, after seeking extension, submitted response to the SCN on 05th March 2025 (SCN Response). Along with the SCN Response, the Acquirer also proposed certain voluntary modifications/behavioural commitments in Form IV read with Regulation 25(4) of the Combination Regulations, to address the prima facie concerns raised by the Commission. The Target vide e-mail dated 05th March 2025 acknowledged the receipt of the Commission's notice dated 4th February 2025 and submitted that it understands that BFL had filed a response and it does not have any further response or submission in relation to the notice. 12. The Commission in its meeting held on 11th March 2025, considered the SCN Response and all material available on record and noted that the SCN response and the voluntary modifications/ behavioural commitments do not seem to address all the prima facie concerns raised by the Commission in the SCN and could not be accepted. Accordingly, the Commission noted that the competition concerns, as raised in SCN, continue to exist and careful analysis was required before reaching any final determination. 13. In view of the above, the Commission vide letter dated 12th March 2025 directed the Parties to (i) publish details of the Proposed Combination, in terms of sub-section (2) Section 29 of the Act read with Regulation 21 of the Combination Regulations within seven days; and (ii) submit details of the Proposed Combination to be published in Form III contained in Schedule I to the Combination Regulations along with the names of newspapers in which such details are proposed to be published, to the Commission before its publication. 14. In compliance with the above direction, the Parties submitted Form III to the Commission on 18th March 2025 and published the same on their website2 as well as in all India