MacRitchie Investments and EvolutionX Debt Capital Master Fund 1

COMPETITION COMMISSION OF INDIA

Combination Registration No. C-2023/12/1084

30th January 2024

Notice under Section 6(2) of the Competition Act, 2002 given by MacRitchie Investments Pte. Ltd. and EvolutionX Debt Capital Master Fund 1 Pte. Ltd.

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 MacRitchie Investments Pte. Ltd. (MacRitchie) and EvolutionX Debt Capital Master Fund 1 Pte. Ltd. (EvoX) [hereinafter, MacRitchie and EvoX are collectively referred to as the ‘Acquirers’]. The notice relates to the proposed subscription of series B compulsorily convertible preference shares (CCPS B) in API Holdings Limited (API/Target) by the Acquirers.

2. MacRitchie and EvoX are existing investors of API. MacRitchie holds around 14 percent of the equity share capital of API on a fully diluted basis along with certain rights including, inter alia, a right to appoint a director or a non-voting observer on the Board of API and certain information and inspection rights. EvoX presently holds non-convertible debentures (NCDs) of 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) and 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 the 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 unallocated after offering to persons set out in (a) to (d) above, at the sole discretion of the board of the Target.

4. Further, on 18th September 2023, a binding term sheet was executed, inter alia, between the Target, MacRitchie and certain other existing investors and incoming investor, Naspers Ventures B.V. (Prosus), and CDPQ Private Equity Asia Pte. Ltd. (CDPQ) (together referred to as ‘Existing Investors’) with MEMG (Binding Term Sheet) as per which it was agreed that the Unsubscribed Available Portion would also be offered to Existing Investors in accordance with the terms of the Binding Term Sheet.

5. Separately, as part of the terms of partial settlement of NCDs, it has been agreed that the Lenders viz., Goldman Sachs (India) Alternative Investment Management Private Limited (Goldman Sachs) and 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 and a portion of the debt will be settled by Target by utilising the proceeds of the CCPS B Rights Issue. To record the terms of partial settlement of NCDs, the Target, on 1st December 2023, entered into a framework agreement (Framework Agreement), Securities Subscription Agreement (SSA), and fourth amended and restated debenture trust deed (Amended DTD) with Vistra ITCL (India) Limited (acting as a debenture trustee on behalf of the Lenders).

6. The proposed combination involves: (i) MacRitchie’s subscription of around 2 percent of the equity share capital of Target on a fully diluted basis in accordance with the Binding Term Sheet read with the Offer Letter (MacRitchie Subscription); and (ii) EvoX’s subscription of up to 1 percent of the equity share capital of Target on a fully diluted basis in accordance with the Framework Agreement read with the SSA (EvoX Subscription) [hereinafter, the MacRitchie Subscription and the EvoX Subscription are together referred to as the 'Proposed Combination'].

7. In terms of Regulation 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, existing shareholding/rights of MacRitchie, shareholding proposed to be acquired by MacRitchie, broader scheme of the issue of shares by API, 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).

8. MacRitchie, incorporated in Singapore, is an investment holding company and does not engage in any business operation other than holding investments. It is an indirect wholly-owned subsidiary (WOS) of Temasek Holdings (Private) Limited (Temasek), being the ultimate parent company. Temasek is an investment company based in Singapore. As submitted, Temasek’s portfolio spans a broad spectrum of industries: Financial Services; Transportation & Industrials; Telecommunications, Media & Technology; Consumer & Real Estate; Life Sciences & Agri-Food; multi-sector funds as well as others (including credit).

9. EvoX, incorporated in Singapore, is jointly held by Temasek and DBS Group Holdings Ltd. (DBS). Further, Temasek holds around 29 percent of the equity share capital of DBS. EvoX is a growth-stage debt financing platform engaged in providing less dilutive financing to technology-enabled companies across Asia, with a focus on India, China, and Southeast Asia.

10. 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), etc.; (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) provision of diagnostic services; (e) provision of 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, etc1.

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1 The Target Group has licensed the operation of the ‘PharmEasy’ marketplace to a third party, Axelia Solutions Private Limited (Axelia), which holds a non-exclusive license to use the intellectual property and information technology in relation to the ‘PharmEasy’ platform and as such, operates the ‘PharmEasy’ platform. Axelia is held by Aarman Solutions Private Limited (Aarman) and Target holds 19.99 percent equity stake in Aarman.