Goldman Sachs (India) Alternative Investment Management Private Limited

Page 1 of 13 COMPETITION COMMISSION OF INDIA Ref. No.: M&A/10/2020/01/CD 14th January 2025 In re: Proceedings against Goldman Sachs (India) Alternative Investment Management Private Limited under Section 43A of the Competition Act, 2002 CORAM: Ms. Ravneet Kaur Chairperson Mr. Anil Agrawal Member Ms. Sweta Kakkad Member Mr. Deepak Anurag Member Appearances: Mr. Rajshekhar Rao, Senior Advocate; Mr. Harman Singh Sandhu, Mr. Mithun V. Thanks, Ms. Shraddha Suryavanshi, Ms. Raveena Kumari Sethia, Mr. Abhishek Hazari, Ms. Aashna Chawla and Mr. Wamic Wasim Nargal, Advocates; and Mr. Greg Flyn, Mr. Shaswata Dutta, representative of Goldman Sachs. Order under Section 43A of the Competition Act, 2002 1. This order shall dispose of the proceedings against Goldman Sachs (India) Alternative Investment Management Private Limited (GS AIMPL), the investment manager of Goldman Sachs AIF Scheme-1 (GS AIF) [collectively ‘GS’], under Section 43A of the Competition Act, 2002 (Act) in relation to subscription by GS AIF, acting through GS AIMPL, to optionally convertible debentures (OCDs) issued by Biocon Biologics Limited (Biocon) which, if calculated on the date of the investment, would have converted to 3.81 percent of the entire shareholding of Biocon (on a fully diluted basis) [Transaction]. Page 2 of 13 I. Background 2. The Transaction was given effect pursuant to the execution of a Securities Subscription Agreement and a Shareholders Agreement (SHA) on 7th November 2020 and was closed on 9th December 2020. Pursuant to the Transaction, GS AIF gained certain rights in relation to reserved matters (Reserved Matter Rights) under the SHA and some of such rights were to be exercised with the prior written consent of the Investor Majority (as defined in the SHA) and some of such other rights were to be exercised with the prior written consent of all the Investors (as defined in the SHA). Further, GS AIF gained certain information rights (Information Rights) and access rights (Access Rights) under the SHA. The Information Rights allow GS AIF access to: (a) certified true copies of minutes of board/committee/shareholder meetings with related records after such a meeting has occurred (Minutes Right), and (b) information relating to any direct change in certain shareholdings, access to certified true copies of the latest capitalization table of Biocon, etc. The Access Rights allow GS AIF to access the premises and personnel of Biocon during normal business hours, upon providing a reasonable prior written notice. 3. GS AIF is an investment scheme under the Goldman Sachs India Alternative Investment Trust registered with the Securities and Exchange Board of India (SEBI) under the SEBI (Alternative Investment Funds) Regulations, 2012 (AIF Regulations). As stated, the primary objective of GS AIF is to carry out investment activities which are permissible for a Category II AIF under the AIF Regulations. 4. Biocon is a subsidiary of Biocon Limited. It has research and development centres in Bengaluru and Chennai, with manufacturing facilities in Bengaluru and Malaysia for monoclonal antibodies, recombinant proteins, and insulins. 5. The Commission observed that the Transaction was not notified and was consummated prior to the approval of the Commission. Subsequently, in this regard, a letter dated 4th February 2022 was issued under Section 36(4) of the Act to GS for furnishing of information and Page 3 of 13 documents relating to the Transaction in order to assess whether further proceeding is required under Section 20(1) and/or Section 43A of the Act (First Letter). 6. GS filed its response to the First Letter on 24th February 2022 (First Response). As the information provided in the First Response was incomplete in certain aspects, another letter dated 29th June 2022 was issued to GS (Second Letter) to provide complete information. The response to the Second Letter was filed by GS on 16th August 2022 (Second Response). In addition, GS provided certain additional clarifications regarding the Second Response on 21st September 2022 (Clarification) [hereinafter, First Response, Second Response, and Clarification are collectively referred to as the ‘Response’). II. Initiation of proceedings under Section 43A of the Act 7. In its meeting held on 18th May 2023, the Commission considered the Response and observed that the Minutes Right is a right which is not available to an ordinary shareholder. The Commission noted that such an arrangement in substance may enable the provision of confidential and commercially sensitive information and strategic information of Biocon to GS. The Commission further noted that other rights viz., the Access Rights and Reserved Matter Rights appear to indicate that the Transaction is strategic in nature and not in the ordinary course of business or made solely as an investment. Considering the same, the Commission observed that the Transaction may not be covered under Item 1 of Schedule 1 (Item 1 Provision) of the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulation, 2011 (Combination Regulations) and ought to have been notified in terms of Section 6(2) of the Act. 8. Therefore, the Commission was of the prima facie view that the Transaction was given effect without giving notice to the Commission, thereby leading to contravention of Section 6(2) of the Act. Accordingly, the Commission issued a Show Cause Notice (SCN) under Regulation 48 of the Competition Commission of India (General) Regulations, 2009 read with Section 43A of the Act to GS on 25th May 2023 directing GS to show cause, in writing, as to why Page 4 of 13 penalty should not be imposed upon it, in terms of Section 43A of the Act for failure to file notice under Section 6(2) of the Act. 9. GS filed the response to the SCN on 29th June 2023 after seeking an extension of time, along with a request for an oral hearing in the matter (Response to SCN). 10. The Commission heard GS at length on 23rd July 2024 and, after considering the request of GS, granted liberty to GS to furnish written arguments/ submissions latest by 30th July 2024. Accordingly, GS submitted written arguments on 30th July 2024. III. Submissions of GS Transaction was solely as an investment 11. Transaction was solely for investment purposes and in GS AIF’s ordinary course of business, with the objective of obtaining a return on its investment without any underlying strategic intent towards participating in the affairs and management of Biocon Biologics and therefore, it benefitted from Item 1 Provision. 12. Item 1 Provision provides an exemption for minority acquisitions, if all the following conditions are satisfied: Condition 1: The acquisition does not entitle the acquirer to hold 25% or more of the total shares (on a fully diluted basis) or voting rights of the target enterprise, whether directly or indirectly (Shareholding Condition); and Condition 2: The acquisition does not lead to an acquisition of control (including negative or joint control), voting arrangements, de facto control, or otherwise (Control Condition); and Condition 3: The acquisition is solely as an investment (SIP Condition) or in the ordinary course of business of the acquirer (OCB Condition). Page 5 of 13 13. Further, it was stated that the explanation to the Item 1 Provision clarifies that the acquisition of less than 10% of total shares/voting rights shall be treated as being “solely as an investment” if the acquirer: (a) has the ability to exercise only such rights that are exercisable by the ordinary shareholders of the enterprise whose shares or voting rights are being acquired to the extent of their respective shareholding (Rights Condition), (b) is not a member of the board of directors of the target nor has the right to nominate such members in future (Board Condition), and (c) does not intend to participate in the management or affairs of the target (Participation Condition) [collectively, the Explanation]. 14. In this backdrop, it was stated that: