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COMPETITION COMMISSION OF INDIA
Combination Registration No. C-2024/02/1115
28th May 2024
Notice under Section 6(2) of the Competition Act, 2002 given by SKH Sheet Metals
Components Private Limited, SKH Management Strategy Services India LLP, SKH M
India Private Limited and Magna Automotive India Private Limited
CORAM:
Ms. Ravneet Kaur
Chairperson
Mr. Anil Agrawal
Member
Ms. Sweta Kakkad
Member
Order under Section 31(1) of the Competition Act, 2002
1.
On 21st February 2024, the Competition Commission of India (Commission) received
a Notice under Section 6(2) of the Competition Act, 2002 (Act) given by SKH Sheet
Metals Components Private Limited (SKH SMC), SKH Management Strategy
Services India LLP (SKH LLP), SKH M India Private Limited (SKH M India) and
Magna Automotive India Private Limited (Magna India) [Hereinafter, SKH SMC,
SKH LLP, SKH M India and Magna India are collectively referred to as Notifying
Parties]. The Notice has been given inter alia pursuant to the execution of (i) Business
Transfer Agreement, dated 7th November 2023, executed amongst Magna India, SKH
LLP, and SKH SMC (BTA), and (ii) Shareholders Agreement, dated 7th November
2023, executed amongst SKH SMC, SKH LLP and Magna India (SHA).
Combination Registration Number: C-2024/02/1115
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2.
The Proposed Combination envisages the transfer of the chassis1 and body–in–white2
(BIW) business division of Magna India (operating under the name of ‘Cosma India’)
[Target Business] to SKH M India. The steps to be consummated for bringing the
Proposed Combination into effect, inter alia, are as under:
(i) The Target Business will be acquired by SKH M India, as a going concern by way
of a slump sale; and
(ii) Magna India will be issued equity / equity-linked instruments representing 15%
shareholding of SKH M India on a fully diluted basis.
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 6th March 2024, 5th April 2024 and 3rd
May 2024, certain information and clarifications were sought from the Notifying
Parties. The responses to these letters were submitted by the Notifying Parties on 2nd
April 2024, 15th April 2024, and 7th May 2024, respectively. The Notifying Parties also
submitted certain additional information on 22nd April 2024, by way of voluntary
submission.
4.
SKH SMC is engaged in the business of manufacturing fuel tanks, chassis, BIW parts
and seat structures for passenger vehicles. It has four manufacturing facilities, one in
Delhi NCR; two near Pune, Maharashtra; and one in Chennai, Tamil Nadu. SKH SMC
belongs to the Krishna Group, which manufactures and supplies various automotive
components to Original Equipment Manufacturers (OEMs) across the world. The auto
components business of Krishna Group consists of the (a) interiors division and (b)
metals division.
1 The chassis is like the foundation of a motor vehicle and is the frame on which the vehicle is built.
2 BIW is the body structure of the automobile that provides its internal shape and strength. This includes
components such as bumpers, side sills, centre pillars, rear pillars, etc.
Combination Registration Number: C-2024/02/1115
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5.
The key product offerings of the metals division include BIW and chassis components,
metal fuel tanks, exhaust systems, roof headliners, sheet metal tooling, and several other
sheet metal components for passenger vehicles.
6.
SKH LLP is engaged in the provision of management services for entities within
Krishna Group.
7.
SKH M India has been incorporated by SKH SMC and SKH LLP for the purpose of
acquiring and operating the Target Business, and it does not undertake any business
activities.
8.
The Target Business is a wholly owned business division of Magna India, which in turn
is owned and operated by Magna International Inc. The Target Business is present only
in the manufacture and supply of chassis and BIW components for 4-wheel passenger
vehicles (PVs), through two (2) plants based in Pune, Maharashtra, one (1) plant in
Chennai, Tamil Nadu and one (1) plant in Sanand, Gujarat.
9.
As the Target Business consists of the manufacture and supply of chassis and BIW
components only for PVs, the overlaps between Krishna Group and Target Business,
have been considered only for the PV segment. Krishna Group and the Target Business
exhibit horizontal overlaps only in the segments of passenger cars [sub-segments of (i)
compact passenger cars, and (ii) mid-size passenger cars] and Utility Vehicles (UVs).
10.
Based on the overlapping chassis and BIW components manufactured and sold by
Krishna Group3 and the Target Business, the overlaps exist for the segments/markets
for the manufacture and supply of (i) chassis components for UVs, (ii) chassis
components for compact and mid-sized passenger cars, (iii) BIW components for UVs,
and (iv) BIW components for compact and mid-sized passenger cars. Further, it has
3 Krishna Group is engaged in the manufacture and sale of the overlapping chassis and BIW components,
specifically through SKH SMC, SKH Metals Limited (SKH Metals), and SKH Y-Tec India Private Limited
(SKH Y Tec).
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been submitted that Krishna Group and the Target Business do not supply the entire
chassis system to any of the OEMs they cater to, and none of their customer OEMs
source the entire assembled chassis system from Original Equipment Suppliers (OESs).
11.
As per the information submitted, the Commission noted that the automotive industry
has emerged largely in the form of clusters, with OEMs being the centres of growth.
There are four major automotive clusters for PVs in India, namely (i) North India (Delhi
– Gurgaon – Faridabad), (ii) Gujarat (Sanand – Hansalpur – Vithalpur), (iii)
Maharashtra (Mumbai – Pune – Nashik - Aurangabad), and South India (Chennai –
Bengaluru - Hosur).
12.
Krishna Group’s facilities in the North India cluster and the Gujarat cluster include
facilities located inside the vendor park of OEMs namely Maruti Suzuki India Limited
(MSIL) and Suzuki Motors Gujarat (SMG), respectively. MSIL and SMG have leased
premises to Krishna Group’s entities (i.e., SKH Metals and SKH Y Tec) for establishing
their manufacturing facilities within their vendor parks and these facilities supply the
overlapping chassis and BIW components to MSIL and SMG. In addition to Krishna
Group, OESs such as Jay Bharat Maruti, Bellsonica Auto Components and Caparo
Maruti, have also established such facilities in these vendor parks.
13.
According to information submitted, for chassis / BIW components, geographical
proximity to OEMs appears to be a significant commercial factor for both OEMs and
OESs, as otherwise there would be transport costs. The Notifying Parties have furnished
the quantity of each overlapping chassis/BIW component, supplied by each facility of
the Krishna Group and Target Business to the facilities of the OEMs.
14.
The Commission assessed the Proposed Combination considering the overlapping
segments and decided to leave the exact delineation of relevant market open as the
Proposed Combination, for the reasons detailed in the ensuing paragraphs, is not likely
to cause appreciable adverse effect on competition (AAEC) in any of the plausible
alternative relevant markets that could be delineated.
Combination Registration Number: C-2024/02/1115
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15.
It is observed that the combined shares of Krishna Group and the Target Business in
the overall segments for manufacture and sale of (i) chassis components for UVs and
(ii) chassis components for compact and mid-sized passenger cars, are in the range of
[30-35]% and [20-25]%, respectively, with insignificant incremental market shares. On
the other hand, the combined shares in the overall markets for manufacture and sale of
(i) BIW components for UVs (ii) BIW components for compact and mid-sized
passenger cars are in the range of [0-5]% and [10-15]%, respectively.
16.
Further, even after excluding sales within vendor parks, the combined market shares
are in the range of [25-30]% and [5-10]% for the manufacture and sale of chassis
components for UVs and compact and mid-sized passenger cars, respectively. On the
other hand, the combined market shares of Krishna Group and the Target Business in
the segments for manufacture and sale of BIW components for UVs and compact and
mid-sized passenger cars, are insignificant, being in the range of [0-5]% and [0-5]%,
respectively.
17.
In terms of the individual overlapping components, the market shares of Krishna Group
and Target Business are not such to cause competition concern either due to low
combined market share or insignificant incremental market share.
18.
Being a bidding market, where procurements are made by OEMs on the basis of bidding
amongst the OESs empanelled by the OEMs, which prefer the lowest cost bidder. It is
observed from the information provided that Krishna Group and the Target Business
face competition from a multitude of competitors which are empanelled by OEMs.
Based on the bidding data provided by the Notifying Parties, the Commission observed
that for a significant number of Request for Proposals (RFPs), they do not appear to be
close competitors and there are other bidders (OESs) for those RFPs.
19.
Apart from the above, the Commission also noted that in the method for procurement
of the overlapping chassis and BIW components, OEMs do not have to rely upon small
