Goldman Sachs AIF Schemes CCPS B Subscription in API Holdings

COMPETITION COMMISSION OF INDIA Combination Registration No. C-2023/12/1085

30th January 2024

Notice under Section 6(2) of the Competition Act, 2002 given by Goldman Sachs (India) Alternative Investment Management Private Limited

CORAM:

Mr. Anil Agrawal
Member

Ms. Sweta Kakkad
Member

Mr. Deepak Anurag
Member

Order under Section 31(1) of the Competition Act, 2002

1. On 4th December 2023, the Competition Commission of India (Commission) received a notice under Section 6(2) of the Competition Act, 2002 (Act), given by Goldman Sachs (India) Alternative Investment Management Private Limited. The notice relates to the proposed subscription of series B compulsorily convertible preference shares (CCPS B) which will convert into such number of equity securities, constituting up to 3.7 percent equity stake (on a fully diluted basis) in API Holdings Limited (API/Target) by the Goldman Sachs Group, Inc. [Goldman Sachs (GS) together with its group entities, GS Group] through its affiliates Goldman Sachs India AIF Scheme-1 (Acquirer 1) and Goldman Sachs India Alternative Investment Trust AIF Scheme-2 (Acquirer 2) [hereinafter, Acquirer 1 and Acquirer 2 are collectively referred to as the ‘Acquirers’], acting through their investment manager, Goldman Sachs (India) Alternative Investment Management Private Limited (Proposed Combination).

2. The Acquirers presently hold non-convertible debentures (NCDs) of the Target.

3. At present, Target is in the process of raising additional capital by issuing CCPS B by way of a rights issue (CCPS B Rights Issue) as per the mechanism set out in the letter of offer dated 25th September 2023 (Offer Letter). It proposes to raise up to INR 3,500 crores (Total Issuance Amount). In terms of the Offer Letter, the CCPS B issued by Target will be offered: (a) to its existing equity shareholders in proportion to their respective equity shareholding; and (b) if any portion of the Total Issuance Amount remains unsubscribed (Unsubscribed Available Portion), the Board of the Target will allot the same in the following waterfall mechanism:

   • (a) Firstly, to Pre-emption Holders, who have opted for such subscription in excess of their respective rights entitlement;
   • (b) Secondly, to CCPS A holders in proportion to their respective shareholding on a fully diluted basis (computed only on account of CCPS A held by such shareholder), for a specified aggregate amount, to the extent available;
   • (c) Thirdly, to the employees who hold employee stock ownership (ESOPs) in proportion to their respective shareholding on a fully diluted basis (computed only on account of ESOPs held by such holder) for a specified aggregate amount, to the extent available;
   • (d) Fourthly, to MEMG International India Private Limited (MEMG), and co-investors identified by MEMG (together referred to as ‘Incoming Investors’); and
   • (e) Lastly, to any persons, any portion of the Unsubscribed Available Portion remaining unallotted after offering to persons set out in (a) to (d) above, at the sole discretion of the board of the Target.

4. Separately, as part of the terms of partial settlement of NCDs, it has been agreed that the Lenders viz., the Acquirers and EvolutionX Debt Capital Master Fund 1 Pte. Ltd. (EvoX) would be issued certain CCPS B for a specified aggregate amount on the same terms as are being offered to MEMG (Subscription Securities), either out of Unsubscribed Available Portion, if available or through preferential allotment. To record the terms of the settlement, API has executed a framework agreement dated 1st December 2023 (Framework Agreement), executed between API and the Lenders through Vistra ITCL (India) Limited (Debenture Trustee) and the Share Subscription Agreement dated 1st December 2023 executed between API, Acquirer 1, Acquirer 2 and EvoX (SSA), which inter alia, records the terms of settlement agreed between the Lenders and API in relation to the portion of the debt which will be settled by allotting the Subscription Securities to Acquirers through a preferential allotment in accordance with the Framework Agreement and the SSA. The Proposed Combination thus involves subscription of CCPS B by the Acquirers in accordance with the Framework Agreement read with the SSA.

5. In terms of Regulations 14(3) of the Competition Commission of India (Procedure in regard to the transaction of business related to combinations) Regulations, 2011 (Combination Regulations), the Commission, vide letter dated 15th December 2023 (RFI), sought certain information and clarifications regarding, inter alia, broader scheme of the issue of shares by API, comparative rights of the Acquirers in API before and after the Proposed Combination, etc. The Acquirers submitted their response on 5th January 2024 after seeking an extension of time (Response to RFI). Apart from the Response to RFI, the Acquirers provided certain additional information/clarifications on 19th January 2024 (Additional Submissions).

6. The Acquirers are the schemes launched by Goldman Sachs India Alternative Investment Trust, set up as a determinate trust under the Indian Trusts Act, 1882, and form part of the GS Group. GS, a Delaware corporation, listed on the New York Stock Exchange and headquartered in New York, is a global investment banking, securities, and investment management firm that provides a range of banking, securities, and investment services worldwide to a substantial and diversified client base that includes corporations, financial institutions, governments and high net-worth individuals.

7. API, incorporated in India, is the ultimate holding company of the Target Group. As submitted, API directly or through its affiliates is, inter alia, engaged in the activities of: (a) wholesale sale and distribution of pharmaceutical products, medical devices, and over-the-counter (OTC) products including fast-moving consumer goods (FMCG); (b) provision of logistics services primarily focussed on pharmaceuticals sector; (c) marketing and selling under a private label brand, of certain OTC products (including nutraceutical products) and pharmaceutical products; (d) diagnostic services; (e) tele-medical consultation services; and (f) developing technology and providing platforms/ software/ tools including marketplace(s), healthcare marketing and data analytics on trends in the pharmaceutical industry, etc. One of the affiliates of API owns the platform 'PharmEasy' which is a marketplace that facilitates the retail sale of pharmaceutical products, medical devices, OTC products, etc.1

8. The activities of Target broadly relate to the healthcare sector. Based on the information given in the Notice, it is observed that there are certain GS Portfolio Entities (which meet the materiality thresholds) which are active in the healthcare sector in India giving rise to certain horizontal overlaps and vertical linkages with the activities of certain API Portfolio Entities in India.

9. Within the healthcare sector, the GS Portfolio Entities and API Portfolio Entities exhibit horizontal overlaps in the following segments/sub-segments: (a) Provision of wholesale sale and distribution of medical devices; (b) Provision of diagnostic services; (c) Provision of tele-medical consultation services; (d) Facilitation of retail sale of pharmaceutical products and OTC products. As can be observed, the aforesaid segments/sub-segments also constitute vertical linkages considering the value chain of the healthcare sector.

10. The aforesaid segments can be further sub-segmented. To illustrate, the diagnostics market may be sub-segmented as pathology and radiology sub-segments and retail sales of pharmaceutical products, and OTC products may also be considered as separate segments for the purpose of competition assessment of the aforesaid horizontal overlaps/vertical linkages. From the relevant geographic market perspective, the frame of reference can be considered as pan India, and for certain segments viz., diagnostic services and its sub-segments, the frame of reference can be narrowed down to the overlapping city level. However, for the reasons given in the ensuing paragraphs, the Proposed Combination is not likely to result in any appreciable adverse effect on competition (AAEC) irrespective of the manner in which the relevant market is delineated and accordingly, the Commission decides to leave precise delineation of relevant market open.

11. The Commission observed that the presence of GS Portfolio Entities and API Portfolio Entities in various segments/sub-segments is insignificant on a standalone and consolidated basis as reflected in their individual or combined market shares. The same seen together with the competition landscape of the respective segment/sub-segments is indicative of lack of likelihood of AAEC in any of the relevant markets that could be delineated considering the aforesaid areas of horizontal overlaps and aforesaid vertical linkages.

12. 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 any AAEC in India. Therefore, the Commission approves the Proposed Combination under Section 31(1) of the Act.

13. This order shall stand revoked if, at any time, the information provided by the Acquirers is found to be incorrect.

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

15. The Secretary is directed to communicate to the Acquirers accordingly.