M/s Ipca Laboratories Limited, Mumbai, Maharashtra

Page 1 of 10 COMPETITION COMMISSION OF INDIA Combination Registration No.C-2023/05/1028 26th July 2023 Notice under Section 6(2) of the Competition Act, 2002 filed by Ipca Laboratories Limited CORAM: Ms. Ravneet Kaur Chairperson Ms. Sangeeta Verma Member Mr. Bhagwant Singh Bishnoi Member Order under Section 31(1) of the Competition Act, 2002 1. On 18th May 2023, the Competition Commission of India (Commission) received a notice under sub-section (2) of Section 6 of the Competition Act, 2002 (Act), filed by Ipca Laboratories Limited (Acquirer). The notice has been given pursuant to Share Purchase Agreement (SPA) dated 24th April 2023 executed among the Acquirer, Unichem Laboratories Limited (Unichem/Target) and Dr. Prakash Amrut Mody (Seller) (collectively, the Acquirer and the Target are referred to as Parties). 2. The proposed combination comprises of: (a) Share Purchase: Pursuant to the SPA, the Acquirer will purchase ~33.38% of the issued and paid-up equity voting share capital (on a fully diluted basis) of the Target from the Seller. Combination Registration No. C-2023/05/1028 Page 2 of 10 (b) Open Offer: Given that (i) the Target is a listed company and (ii) the Acquirer is acquiring >25% shareholding in the Target pursuant to the SPA, the Acquirer is required to make an open offer for the purchase of equity shares of up to 26% of the Target’s equity share capital in accordance with the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (The Share Purchase and Open Offer are collectively, the Proposed Combination). Accordingly, the Acquirer will acquire ~ 59.38% shareholding of the Target on account of the Proposed Combination. 3. In terms of Regulation 14 of Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (Combination Regulations), the Commission, vide, communication dated 26th May 2023, sought certain information(s)/clarification(s), inter alia, relating to the activities of the Parties; the response to the same was received on 7th June 2023. As the response received was incomplete in certain respects, therefore, in continuation to the letter dated 26th May 2023, another communication dated 19th June 2023 was sent. The response to the same was received on 23rd June 2023. Further, the Acquirer provided additional information through letter dated 6th July 2023 and 11th July 2023. Description of the Parties 4. Acquirer Group: Mr. Premchand Godha and his family members (comprising of (i) Mr. Premchand Godha’s (i) wife, Mrs. Usha Godha, (ii) sons, Mr. Pranay Godha and Mr. Prashant Godha, (iii) daughters-in-law, Mrs. Bhawna Godha and Mrs. Neetu Godha, (iv) brother, Mr. Nirmal Jain and (v) sister-in-law, Mrs. Kalpana Jain) (collectively, Godha Family) directly and indirectly exercise ~36.72% shareholding in the Acquirer. The Godha Family is the ultimate parent entity of the Acquirer. It is stated in the notice that the Godha Family and all entities over which the Godha Family directly or indirectly exercises (a) 10% or more shareholding, or (b) a right or ability to exercise any right not available to ordinary shareholders (including any advantage of a commercial nature) or (c) a right or ability to nominate a director or Combination Registration No. C-2023/05/1028 Page 3 of 10 observer comprise the Acquirer Group. The Acquirer Group does not carry out any business activities outside India except through the Acquirer. The Acquirer Group is engaged in business activities in the pharmaceutical sector in India through the following entities: (i) Makers Laboratories Limited (Makers) (ii) Resonance Specialties Limited (Resonance) and (iii) Kaygee Laboratories Private Limited (Kaygee). 5. Acquirer: The Acquirer is a publicly listed pharmaceutical company incorporated in India and is engaged in manufacture of formulations and Active Pharmaceutical Ingredients (API) for various therapeutic segments. The Acquirer has business activities in 120 countries across 6 continents i.e., Asia, Africa, South America, North America, Europe, and Australia. In India, the Acquirer is engaged in the manufacture and sale of branded formulations in multiple therapeutic segments. The Acquirer also manufactures and sells APIs and intermediates in India. The Acquirer is present in India through the following entities: (i) Ramdev Chemical Private Limited (Ramdev) (ii) Trophic Wellness Private Limited (Trophic) (iii) Avik Pharmaceutical Limited (Avik) (iv) Krebs Biochemicals & Industries Limited (Krebs) and (v) Lyka Labs Limited (Lyka). Further, the Acquirer has a wholly owned Indian subsidiary, Tonira Exports Limited, which is not engaged in any business activity. 6. Target: The Target is a publicly listed pharmaceutical company incorporated in India. Dr. Prakash Amrut Mody and his family members directly and indirectly exercise ~50.93% shareholding in the Target. Globally, the Target is active in the sale of formulations, APIs, intermediates, and contract manufactured finished formulation dosage in over 75 countries. In India, the Target is involved in the manufacture of APIs. The Target’s formulations business is completely export-oriented and the Target does not sell any formulations in India. The Target has physical presence in India, inter alia, through formulation plants in Goa, Himachal Pradesh and Uttar Pradesh; API plants in Maharashtra and Madhya Pradesh and a research centre in Combination Registration No. C-2023/05/1028 Page 4 of 10 Goa. The Target also has an associate company Synchron Research Services Private Limited in Gujarat, which is involved in the business of contract research in India. Identification of overlaps 7. It is submitted in the notice that both the Acquirer Group and Target are involved in the manufacture and sale of APIs in India. 8. Further, the Acquirer also manufactures and sells intermediates in India; however, the Target sold limited intermediates solely on ad-hoc basis in India in FY 2023. These sales were only one-time disposal sales on account of excess production which generated miniscule revenue for the Target. Accordingly, it is submitted that there is no existing/potential vertical overlap on account of intermediates manufactured by the Parties. The Acquirer is also engaged in manufacture and sale of branded formulations in India; however, the Target does not sell any formulations in India and the Target’s formulations business is completely export-oriented. Horizontal Overlaps 9. It is submitted in the notice that the Acquirer Group and the Target are active in the sale and manufacture of certain identical/substitutable APIs in India. It is stated that the APIs are the primary inputs used in the manufacture of formulations and that each API must be considered as a separate relevant market because when an entity manufactures a given formulation, it will necessarily require the specific APIs required to create the formulation. A formulation manufacturer, for the purposes of manufacturing a particular formulation, cannot use any API other than the API used in that formulation. Hence, APIs form the core element of any formulation and constitute a separate relevant market, distinct from formulations or other finished drug products. Combination Registration No. C-2023/05/1028 Page 5 of 10 10. The Acquirer has submitted that at the broad level, the relevant product market can be defined as the overall market for the manufacture and sale of APIs and at the narrower level each API can be considered as a separate product market. Accordingly, considering the identical/substitutable APIs manufactured and sold by the Acquirer Group and Target in India, the relevant product markets can be defined at the narrower level for the following APIs: (i) Biosprolol Fumarate (BFu), (ii) Hydrochlorothiazide (HChl), (iii) Bendroflumethiazide (BFlu), (iv) Metoprolol Succinate (MSuc), (v) Amlodipine Besylate (ABes), (vi) Quetiapine Fumarate (QFum), (vii) Phenylephrine Hydrochloride (PHyd), and (viii) Meloxicam. Further, the relevant geographic market for each of the APIs may be delineated as ‘India’. In view of the foregoing, it is submitted that at the broader level, the relevant market may be considered as the ‘market for the manufacture and sale of APIs in India’ (Broad API Market) and at the narrower level, the relevant markets may be considered as follows: (i) Market for the manufacture and sale of BFu in India (BFu Market), (ii) Market for the manufacture and sale of HChl in India (HChl Market), (iii) Market for the manufacture and sale of BFlu in India (BFlu Market), (iv) Market for the manufacture and sale of MSuc in India (MSuc Market), (v) Market for the manufacture and sale of ABes in India (ABes Market), (vi) Market for the manufacture and sale of Qfum in India (QFum Market), (vii) Market for the manufacture and sale of PHyd in India (PHyd Market), and (viii) Market for the manufacture and sale of Meloxicam in India (Meloxicam Market) [BFu Market, HChl Market, BFlu Market, MSuc Market, ABes Market, QFum Market, PHyd Market and Meloxicam Market are individually and collectively, the Relevant API Markets].