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The Competition Commission of India approves the acquisition of approximately 24.16 percent of the total equity shareholding in Quality Care India Limited by Centella Mauritius Holdings Limited under Section 31(1) of the Competition Act, 2002. The transaction involves the transfer of equity shareholding from one affiliate of TPG to another and the exit of co-investors. The Commission concludes that the transaction is not likely to cause an appreciable adverse effect on competition in India. The order remains subject to revocation if the provided information is incorrect.
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COMPETITION COMMISSION OF INDIA
(Combination Registration No. C-2023/07/1043)
20th September 2023
Notice under Section 6(2) of the Competition Act, 2002 given by Centella Mauritius Holdings Limited
CORAM:
Mr. Anil Agrawal
Member
Ms. Sweta Kakkad
Member
Order under Section 31(1) of the Competition Act, 2002
On $31^{\text{st}}$ July 2023, the Competition Commission of India (Commission) received a Notice under Section 6(2) of the Competition Act, 2002 (Act), given by Centella Mauritius Holdings Limited (Centella Mauritius/Acquirer). The Notice was filed pursuant to the execution of: (i) Share Purchase Agreement dated $26^{\text{th}}$ July 2023 (SPA), executed between the Acquirer, Touch Healthcare Private Limited (THPL/Seller) and Quality Care India Limited (QCIL/Target); and (ii) Shareholders Agreement dated $27^{\text{th}}$ July 2023 (SHA), executed between the Acquirer, QCIL and BCP Asia II Topco IV Pte. Ltd. (BCP), an entity controlled by funds advised and/or managed by affiliates of Blackstone Inc.
The proposed transaction involves acquisition of approximately 24.16 percent of the total equity shareholding in QCIL, on a fully diluted basis, by Centella Mauritius (Proposed Transaction).
In terms of Regulation 14 of the Combination Regulations, vide letter dated $24^{\text{th}}$ August 2023, the Acquirer was required to provide certain information/document(s) latest by $29^{\text{th}}$ August 2023. The Acquirer filed its reply on $28^{\text{th}}$ August 2023 followed by further submissions on $11^{\text{th}}$ September 2023.
The Acquirer is a newly incorporated special purpose investment vehicle and currently has no operations in India. The Acquirer is majorly owned and controlled by an entity, which is advised by the affiliates of TPG Inc. (TPG), the ultimate holding company of the TPG Group. TPG, is a global, diversified investment firm which operates through multiple strategies including buyout/control situations, growth & technology investing, impact investing (including climate) across multiple sectors such as financial services, technology, consumer, travel, media, real estate and healthcare.
QCIL, an unlisted public limited company is an indirect subsidiary of Evercare Health Fund, L.P, Cayman Islands (Evercare)$^1$, which is also owned and controlled by TPG. QCIL operates a network of multi-speciality hospitals under the brand name CARE Hospitals across various cities in India. CARE Hospitals has 17 healthcare facilities (16 hospitals and 1 clinic) serving 7 cities viz., Hyderabad (7 hospitals, 1 clinic), Vishakhapatnam (2 hospitals$^2$), Bhubaneshwar (1 hospital), Nagpur (1 hospital), Raipur (1 hospital), Indore (2 hospitals) and Aurangabad (2 hospitals).
The Commission noted that TPG has presence in the healthcare sector through its other affiliates (other than QCIL) as well. Specifically, other TPG affiliates have operations in the areas of provision of healthcare services through hospitals, wholesale distribution of pharmaceutical products, provision of retail diagnostic centres, manufacture and sale of medical devices etc.
As observed, there are certain specificities of the Proposed Transaction which need to be considered before going into the assessment of the Proposed Transaction for any impact on market dynamics.
First, at present, TPG (indirectly) holds a majority shareholding in QCIL (as THPL, the Seller, which currently holds approximately 96.65 percent shareholding in QCIL is an affiliate of TPG). By way of the Proposed Transaction, THPL would be selling its equity shareholding in QCIL to the Acquirer, which is also an affiliate of TPG. As such, the Proposed Transaction will effectively result in transfer of equity shareholding of QCIL from one affiliate of TPG to another. However, as noted, CDC Group Plc and Covidien Private Limited (together, Co-investors) currently hold 12.24 percent and 16.32 percent shareholding along with certain rights in Touch Holdco 3 Private Limited, the holding company of THPL, based on which the Co-Investors could be considered to be jointly controlling QCIL along with TPG. Thus, the only change resulting from the Proposed Transaction is that pursuant to the Proposed Transaction, the Co-investors of TPG will exit their investment in QCIL resulting in change in the control dynamics of QCIL. Accordingly, the Commission observed that this change in control dynamics of QCIL is the primary basis for assessment of the Proposed Transaction.
Second, by way of a separate transaction (notified to the Commission by way of Combination Regn. No. C-2023/07/1044), it is envisaged that BCP will acquire approximately 72.49% of the total equity shareholding of QCIL on a fully diluted basis (BCP Transaction). The Commission observed that though the BCP Transaction needs to be assessed separately for any appreciable adverse effects on the competition dynamics, the same is also relevant to the assessment of Proposed Transaction in so far as it allows for proper consideration of position of TPG as a shareholder in QCIL on a forward-looking basis.
Accordingly, the Commission considered it appropriate to examine the Proposed Transaction in the backdrop of aforesaid specificities of the Proposed Transaction viz., the exit of Co-Investors and the BCP Transaction.
Considering the exit of Co-Investors and BCP Transaction, it becomes clear that TPG's shareholding in QCIL (along with Co-Investors) is reducing from existing shareholding of around 97 percent to 24 percent shareholding of TPG (without the Co-Investors). Under the circumstances, there is no foreseeable impact on market concentration and competition dynamics from the perspective of TPG's presence in QCIL considering the change in shareholding of TPG. As regards inter se change of shareholding composition of 24 percent resulting from the exit of Co-Investors, the Commission observed that considering the extent of shareholding, nature of rights of Co-investors in QCIL etc., the Proposed Transaction is not expected to result in any changed ability/incentive of TPG vis-a-vis the operational dynamics of QCIL which could potentially cause any adverse effect on competition in any of the plausible markets in which QCIL may be said to be operating.
Considering the material on record, including the details provided in the Notice and the assessment of the Proposed Transaction based on the factors stated in Section 20(4) of the Act, the Commission is of the opinion that the Proposed Transaction is not likely to have any AAEC in India. Therefore, the Commission approves the Proposed Transaction under Section 31(1) of the Act.
The order may be revoked if, at any time, the information provided by the Acquirer is found to be incorrect.
The information provided by the Acquirer shall be treated as confidential in terms of and subject to the provisions of Section 57 of the Act.
The Secretary is directed to communicate to the Acquirer accordingly.
$^1$ The holding company of QCIL is THPL and the ultimate holding company of QCIL is Evercare.
$^2$ One of the 2 QCIL hospitals in Vishakhapatnam is not operational yet.
