Acquisition of Equity Share Capital in Utkarsh CoreInvest Limited by Citrine Inclusion Limited

COMPETITION COMMISSION OF INDIA

Combination Registration No. C-2024/05/1154

3rd September 2024

Notice under Section 6(2) of the Competition Act, 2002 given by Citrine Inclusion 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 24th May 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 Citrine Inclusion Limited (Citrine). The Notice was given pursuant to the execution of inter alia Share Purchase Agreement between Citrine and NMI Frontier Fund KS (NMI) on 23rd April 2024. Subsequently, another Share Purchase Agreement was also executed between Citrine and British International Investment Plc. (BII) on 15th July 2024.

2. Citrine, vide communications dated 31st May 2024 and 15th July 2024 issued under Regulation 14 of the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011, was required to remove defects from the Notice and furnish certain information relevant for the purpose of assessment of the proposed combination. Citrine furnished its response vide submissions dated 28th June 2024, 12th July 2024, 17th July 2024, 19th July 2024, 14th August 2024 and 21st August 2024.

3. The proposed combination envisages the acquisition of 13.58%1 of the issued and paid-up equity share capital of Utkarsh CoreInvest Limited (UCL) by Citrine (Proposed Combination) from NMI and BII.

4. Citrine, a newly incorporated company, is an investment holding company registered in Ireland. It is owned and controlled by a fund ultimately managed by LeapFrog Group GP, Ltd. (LeapFrog). LeapFrog is a social impact focused private equity investment firm that invests in inclusive financial services, healthcare and climate solutions companies in emerging markets.

5. UCL is a Core Investment Company registered with the Reserve Bank of India. It has only one subsidiary namely, Utkarsh Small Finance Bank Limited (Utkarsh Small Finance Bank), a small finance bank incorporated in 2016. Utkarsh Small Finance Bank is engaged in providing banking and financial services, established with the objective to focus primarily on ensuring the financial inclusion of the unbanked and underbanked sections across the country.

6. It has been submitted that one of the limited partners (Relevant Investor) has a right to nominate and appoint a person to serve as a member of the management board (Management Board) of LeapFrog Investments Platform, Ltd. It has been submitted that the overlap mapping between the activities of the Relevant Investor (including its group

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1 As per its shareholding pattern as on 2nd April 2024.

entities and affiliates) on one hand and UCL (including its subsidiary) on the other, is not warranted for the purposes of competition assessment of the Proposed Combination. This is largely based on the submissions that the Relevant Investor: (i) does not have any rights or influence over the investment recommendations of the investment manager to the general partner (GP) entities of LeapFrog funds; or (ii) does not have any rights or influence over the investment decisions of the GP entities of LeapFrog funds; (iii) has not received and does not have any right to receive any confidential information from LeapFrog in relation to a transaction or any commercially sensitive information of the investee entity; (iv) does not have any form of say or influence or control over LeapFrog's entry and exit decisions in relation to its investment in UCL or any other entity. However, without prejudice to its submissions, Citrine has furnished details of affiliates of the Relevant Investor exhibiting overlaps with UCL.

7. Based on the information furnished by Citrine, it is observed that the Relevant Investor has representation on the Management Board. The scope of the mandate of the Management Board includes governance of the firm [LeapFrog Investments Platform], leadership role selection and appointment in line with the Management Board Terms of Reference, deciding changes to the members of the investment committee, review and approving overall allocation of KPIs and resources/budgets, Remuneration Committee consisting of Independent Non-Executive Member, the CEO and the Chairman to review partner level remuneration. From the scope of the mandate of the Management Board, it is observed that it includes matters of considerable significance qua the operations of the LeapFrog Investments Platform. The participation of the Relevant Investor in the Management Board provides it the ability to influence the decision operations of the LeapFrog Investments Platform. The role/position of the Relevant Investor in LeapFrog Investments Platform goes beyond the role of an ordinary limited partner. However, irrespective of whether the Relevant Investor and its portfolio entities are considered for assessment of the likely effect of the Proposed Combination or not, the Proposed Combination is not likely to raise competition concerns.

8. The business activities of certain affiliates of LeapFrog and/or the Relevant Investor on one hand and UCL on the other exhibit horizontal overlaps with regard to the provision of loans and lending services; its segments viz., provision of retail loans, and wholesale loans; and their sub-segments viz., personal loans, gold loans, home loan, home improvement loans, MSME loans, loan against property, micro loans, commercial vehicle loans, loans to financial institutions and corporate loans. Certain affiliates of the Relevant Investor and/or LeapFrog on one hand and UCL on the other also exhibit horizontal overlap with regard to deposit-taking activity, activity of customer operating unit (COU) under Bharat Bill Payment System (BBPS), distribution of insurance products, and distribution of mutual funds. Utkarsh Small Finance Bank also provides overdrafts. One of the affiliates of the Relevant Investor has a portfolio of overdraft loans, which were received by it upon the merger of another entity with it. The said affiliates of the Relevant Investor is not active in the activity of provision of overdrafts in India. The portfolio of overdrafts transferred to it is in a rundown state.

9. The Commission observes that the combined market shares of affiliates of LeapFrog and/or the Relevant Investor and UCL for loans and lending services, its overlapping segments, and sub-segments; deposit-taking activity; distribution of mutual funds is less than 1% except for the gold loans being [0-5]%. The combined market share of affiliates of LeapFrog and/or the Relevant Investor and UCL for distribution of insurance products is [0-5]%. The Combined market of affiliates of LeapFrog and/or the Relevant Investor; and UCL for the provision of BBPS services as a COU is [10-15]% with incremental market share being less than 1%. This business segment is characterised by the presence of other players such as PhonePe, Paytm, HDFC Bank, and ICICI Bank.

10. Considering the material on record, including the details provided in the notice and the assessment of the Proposed Combination based on the factors stated in Section 20(4) of the Act, the Commission is of the opinion that the Proposed Combination is not likely to have appreciable adverse effect on competition in India. Therefore, the Commission approves the Proposed Combination under Section 31(1) of the Act.

11. This order may be revoked if, at any time, the information provided by Citrine is found to be incorrect.

12. The information provided by Citrine shall be treated as confidential in terms of and subject to provisions of Section 57 of the Act.

13. The Secretary is directed to communicate this order to Citrine.