MUFG Bank, Ltd.

COMPETITION COMMISSION OF INDIA

Combination Registration No. C-2024/10/1193

26th November 2024

Notice under Section 6(2) of the Competition Act, 2002 given by MUFG Bank, Ltd.

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 $7^{\text{th}}$ October 2024, the Competition Commission of India (Commission) received a Notice under Section 6(2) of the Competition Act, 2002 (Act) given by MUFG Bank, Ltd. (MUFG Bank/Acquirer). The Notice was filed pursuant to the execution of (i) Exercise Notice for subscription to Additional Securities dated $20^{\text{th}}$ July 2024 (which was made effective as on $9^{\text{th}}$ July 2024), issued by MUFG Bank to DMI Finance Private Limited (DMI Finance/Target), DMI Limited, Shivashish Chatterjee, and Yuvraja C. Singh; and (ii) Tranche II Share Subscription Agreement dated $21^{\text{st}}$ August 2024, executed amongst DMI Finance, MUFG Bank, DMI Limited, Shivashish Chatterjee, and Yuvraja C. Singh (SSA).

2. The Proposed Combination entails the subscription of certain Compulsorily Convertible Preference Shares (CCPS) in DMI Finance by MUFG Bank, such that MUFG Bank's shareholding of the share capital of DMI Finance will increase from 9.67% to 20.0%$^1$.

3. In terms of Regulation 14 of Competition Commission of India (Combinations) Regulations, 2024 (Combinations Regulations), vide letter dated $16^{\text{th}}$ October 2024, certain information and clarifications were sought from the Acquirer. The response to this letter was submitted by the Acquirer on $13^{\text{th}}$ November 2024, after seeking an extension of time. The Acquirer also submitted additional information vide a voluntary submission given on $25^{\text{th}}$ November 2024.

4. The Acquirer, is wholly owned and controlled by the Mitsubishi UFJ Financial Group, Inc. (MUFG Group), which is a financial services and holding company. MUFG Bank, the core banking unit of the MUFG Group (Acquirer Group), provides a wide range of financial services to individual and corporate clients, including retail banking, commercial banking, investment banking, and wealth management services. In India, MUFG Bank provides: (i) corporate banking loans; (ii) deposit accounts; (iii) remittances; (iv) trade finance; and (v) bank guarantees.

5. DMI Finance is a private limited company registered as a middle layer 'systematically important non-deposit accepting' Non-Banking Financial Company (NBFC) with the Reserve Bank of India (RBI). It is engaged in the provision of loans and lending services in India including the provision of personal loans, loans to micro, small and medium enterprises (MSME), and consumption loans. DMI Finance is a subsidiary of DMI Limited, with the latter holding its 66.90% shareholding [hereinafter, Acquirer, Acquirer Group and Target are collectively referred to as Parties].

6. For the purpose of overlap assessment, the activities of the Acquirer Group, Acquirer, and Target (including their affiliates) have been considered. Considering their presence, it was observed that MUFG Bank and an affiliate of the Acquirer Group, i.e., Krazybee Services Private Limited (Krazybee) exhibit a horizontal overlap with the Target's activities in the broad market for provision of loans and lending services. Within the broad market for the provision of loans and lending services, Krazybee and the Target exhibit overlaps in the narrow segment of retail loans and lending services, and in the narrowest sub-segments of (i) personal loans, (ii) MSME loans, and (iii) consumption loans. Additionally, another affiliate of the Acquirer Group, namely, Tech Solutions Private Limited (Finnovation) exhibits a horizontal overlap with the affiliates of the Target, namely, Saarathi Finbiz Private Limited (Saarathi) and Dotpe Private Limited (Dotpe) in the market for distribution of loans and lending services in India.

7. Besides the presence of horizontal overlaps as specified above, it is observed that Acquirer group and its affiliates exhibit vertical linkages with the Target. The first vertical linkage arises from the presence of Lentra AI Private Ltd. (Lentra), an affiliate of the Acquirer Group, in the upstream market for provision of loan management services and the presence of the Target in the downstream market for provision of loan and lending services in India. The second vertical linkage arises from the presence of Acquirer and its affiliates, namely MUFG Bank and Krazybee, in the upstream market for provision of loans and lending services in India and the presence of Finnovation and Saarathi in the downstream market for distribution of loans and lending services in India.

8. The Commission observed that, considering the nature and extent of aforesaid overlaps and the competition assessment given in the subsequent paragraph, the Proposed Combination is not likely to cause a significant change in competition dynamics in any of the plausible markets that could be delineated and accordingly, decided to keep the definition of relevant market open.

9. The combined market share of the Parties (including their affiliates) in the both the overlapping markets and the sub-segments is in the range of [0-5]%, with the incremental market share being less than 1%. Further, the market segments are fragmented with the presence of other competitors in each of the market segment that has been assessed. Therefore, given the miniscule presence of the Parties and/or their affiliates, none of these enterprises possess the ability or incentive to cause foreclosure in any of the markets.

10. With respect to the presence of the Parties (inclusive of their affiliates), the market shares of the Parties in both the upstream and downstream markets are less than 1%. Given the miniscule presence of the Parties and/or their affiliates, none of these enterprises possess the ability or incentive to cause foreclosure in any of the markets.

11. 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 effects on competition in India. Therefore, the Commission approves the Proposed Combination under Section 31(1) of the Act.

12. The order may be revoked if, at any time, the information provided by the Acquirer is found to be incorrect.

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

14. The Secretary is directed to communicate to the Acquirer accordingly.

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^1 Prior to the Proposed Combination, MUFG Bank already holds a shareholding of 9.67% in DMI Finance, on a fully diluted basis which was acquired, pursuant to a Share Subscription Agreement executed on $31^{\text{st}}$ March 2023 (Initial Investment) along with a Shareholders Agreement executed on $31^{\text{st}}$ March 2023.