Sanyo Special Steel Co. Ltd.

COMPETITION COMMISSION OF INDIA Combination Registration No. C-2024/03/1122

30th April 2024

Notice under Section 6(2) of the Competition Act, 2002 given by Sanyo Special Steel Co. Limited

CORAM:

Ms. Ravneet Kaur Chairperson

Ms. Sweta Kakkad Member

Mr. Deepak Anurag Member

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

1. On 14th March 2024, the Competition Commission of India (Commission) received a Notice under Section 6(2) of the Competition Act, 2002 (Act) given by Sanyo Special Steel Co. Limited (Sanyo/Acquirer). The Notice has been given pursuant to the execution of (i) Share Purchase Agreement, dated 2nd February 2024, entered into between Sanyo and Mitsui & Co. Ltd. (Mitsui) (SPA); and (ii) Shareholders’ Agreement, dated 9th February 2018, along with Amendment dated 12th March 2019 between Sanyo, Mitsui and Sanyo Special Steel Manufacturing India Private Limited (SSMI/Target) (SHA).

2. The Proposed Combination envisages the additional acquisition of 15.43% shareholding by Sanyo in SSMI from Mitsui.

3. In terms of Regulation 14 of the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (Combination Regulations), vide letters dated 1st April 2024, certain information and clarifications were sought from Sanyo. The response to the letter was submitted by Sanyo on 12th April 2024. Sanyo vide its email dated 15th April 2024 also submitted certain additional information.

4. Sanyo is a Japan-based company that manufactures and sells steel products globally. It is engaged in manufacturing and marketing of various special steel products including bearing steel, engineering steel, stainless steel, heat resistant steel and tool steel. Further, on a global scale, it also manufactures metal powder and is engaged in manufacturing and marketing of metal powders and powder metallurgy products as well as manufacture of Formed and Fabricated Materials. It has manufacturing hubs in Europe and India, and has offices in Thailand, Mexico and China.

5. The erstwhile Nippon Steel & Sumitomo Metal Corporation was renamed in 2019 as Nippon Steel Corporation (NSC). Sanyo is part of the Nippon Steel Corporation Group (Acquirer Group) where NSC holds 53.10% shareholding in Sanyo. It has been submitted that the Acquirer Group is engaged inter alia in the production of steel products in fifteen countries with the largest number of mills in its home country -Japan. NSC is engaged in the business of manufacturing tubes and pipes, automotive cold rolled steel sheets, crankshafts, and auto-parts in India. NSC also imports and sells products such as wires, steel sheets, welding materials, rolls and iron casting products, stainless steel etc.

6. SSMI was a joint venture company which was incorporated in September 2012 between Mahindra & Mahindra Limited, Acquirer/Sanyo and Mitsui. In 2013, the shareholding of the Target was such that Mahindra & Mahindra Limited (Mahindra) held 51%, Sanyo held 29% and Mitsui held 20% of the issued share capital of the Target. In March 2018, Sanyo Special Steel Co. Ltd. acquired an additional 22% shareholding from Mahindra, along with a capital increase in February 2019. Subsequently, in April 2023, a Share Purchase Agreement was executed (2023 SPA) under which Sanyo purchased Mahindra’s 22.81% remaining shareholding in the Target. Pursuant to this, Sanyo held 80% and Mitsui held 20% shares in the Target. In July 2023, there was another capital increase, by which Sanyo’s shareholding increased to 84.57% and Mitsui’s shareholding reduced to 15.43% in the Target. Presently, SSMI/Target is a subsidiary of Sanyo.

7. SSMI is engaged in the market for manufacture of forged products (round bars), hot rolled products (round bars, round corner square bars, rectangle bars) and cast products (bottom poured ingots). The steel manufactured by SSMI is used for various applications in industries like Automobile, Bearing, Engineering, Oil Gas & Mining, Railways etc.

8. The Commission assessed the Proposed Combination considering all plausible relevant markets and decided to leave the precise delineation of the relevant market open as the Proposed Combination, for the reasons detailed in ensuing paragraphs, is not likely to cause an appreciable adverse effect on competition in any of the plausible alternative relevant markets that could be delineated.

9. Considering the activities of Sanyo and SSMI (including their affiliates), it is noted that the Acquirer Group (through Sanyo and NSC) exhibits a horizontal overlap with SSMI in the market for manufacture and sale of steel bars in India. Based on the submission of Sanyo, the Commission noted that the combined market share as well as the incremental market share of the Acquirer Group (through Sanyo and NSC) and SSMI in the aforementioned market, on the basis of the volume of steel sold domestically, is less than 1%. Moreover, the presence of other well-established players in the said market segment such as JSW Steel, SAIL etc. will continue to impose competitive constrains on the parties.

10. In addition to the aforementioned horizontal overlap, SSMI’s manufacturing and sale of steel ingots in India (upstream market) and Acquirer Group’s (through Sanyo and NSC) manufacture and sale of steel bars in India (downstream market) results in a vertical linkage. However, the respective market shares of the parties, i.e. SSMI in the upstream market and Acquirer Group in the downstream market, on the basis of the volume of domestic sales, is less than 1%.

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 effect on competition in India. Therefore, the Commission approves the Proposed Combination under Section 31(1) of the Act. This order is, however, issued without prejudice to the proceedings under Section 43A of the Act.

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

13. The information provided by 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 Acquirer accordingly.