Merger of Tata Motors Finance into Tata Capital

COMPETITION COMMISSION OF INDIA Combination Registration No.C-2024/08/1174

10th September 2024

Notice under Section 6(2) of the Competition Act, 2002 filed by Tata Capital Limited and Tata Motors Finance Limited

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 13th August 2024, the Competition Commission of India (Commission) received a notice under sub-section (2) of Section 6 of the Competition Act, 2002 (Act) filed by Tata Capital Limited (TCL) and Tata Motors Finance Limited (TMFL) [Hereinafter, the TCL and TMFL are collectively referred to as the "Parties"].

2. The notice has been filed pursuant to board resolution passed by TCL and TMFL respectively, on 4th June 2024; the Implementation Agreement entered into between TCL, TMFL, Tata Motors Limited (TML), and TMF Holdings Limited (TMFHL) on 12th June 2024; and the Scheme of Arrangement.

3. The proposed combination relates to the proposed merger of TMFL with and into TCL, with TCL being the surviving entity (Proposed Combination). It involves the merger of two entities belonging to the Tata Group. Post amalgamation of TMFL with and into TCL, TMFHL, the parent entity of TMFL which holds 100% of TMFL, will hold approximately 4.68% in TCL.

4. In terms of Regulation 14 of Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011, communication dated 28th August 2024 was issued to the Acquirer seeking certain information(s)/ clarification(s), inter alia, relating to the activities of the Parties and the response to the same was received on 03rd September 2024.

5. TCL is the flagship financial services company of the Tata Group. It is a subsidiary of Tata Sons Private Limited (TSPL) which holds 92.83% in TCL. It is operating as a Non-Banking Financial Company – Investment and Credit Company (NBFC-ICC) engaged primarily in the business of lending, leasing, factoring, financing and distributing financial products. In India, it is inter alia carrying on the business of lending and offering services/products in the financial services sector catering to the retail, small and medium enterprise (SME) and corporate customers in India. Specifically, it provides loans such as auto loans (used car loans and two-wheeler loans), loans for purchase of construction equipment, commercial vehicle loans, business loans, loans against property, personal loans, loans against securities etc. TCL is present outside India through its subsidiaries located in Singapore.

6. TMFL belongs to the Tata Group and is an indirect wholly owned subsidiary of TML through TMFHL. TSPL, which holds 92.83% of the shareholding of TCL, also holds approximately 43.69% of the total equity share capital of TML, while the remaining shareholding is held by public shareholders. Since TSPL indirectly holds more than 26% in TMFL, both TCL and TMFL fall under the Tata group. TMFL does not have any subsidiaries. TMFL operates as an NBFC-ICC and is inter alia engaged in the business of (a) granting loans and facilities for financing the purchase of: (i) new vehicles manufactured by TML and its group companies; and (ii) pre-owned vehicles including refinancing existing vehicle finance loans; and (b) granting of loans and advances to transporters, dealers, and vendors of TML including the provision of working capital facilities, invoice discounting facilities and factoring facilities. TMFL has no presence outside India.

7. TSPL is the ultimate holding company of the Tata group. It is an investment holding company, which is registered as a core investment company with the Reserve Bank of India. TSPL’s relationship with its group companies is governed primarily by (a) shareholding held by TSPL in such companies, and (b) Brand Equity and Promotion Agreement (BEPB Agreement). Every company of the Tata group (that uses the 'Tata' brand) is a signatory to the Tata Sons’ BEPB Agreement (other than certain joint ventures), which confers upon the said companies the right to use the Tata brand in return for a commitment from them to run their businesses ethically and with excellence.

8. Tata Group means those entities in which TSPL, directly or indirectly, is in a position to (i) exercise 50% or more of the voting rights, (ii) appoint more than 50% of the members of the board of directors, or (iii) control the management or affairs of the enterprise. Further, the Tata companies, which are associate companies of TSPL, have also been considered to be a part of Tata Group. It is stated that the Tata Group operates in more than 100 countries and is primarily present in the following sectors: technology, steel, automotive, consumer and retail, infrastructure, financial services, aerospace and defence, tourism and travel, telecom and media, and trading and investments.

9. It is submitted that TCL/ Tata Group entities (that meet the Materiality Threshold1 and have presence in India) exhibit horizontal overlaps vis-a-vis TMFL in the following relevant markets: at a broad level “the market for loans and lending services in India” (Broad Lending Market), and at a narrow level: (a) “the market for provision of retail loans in India” (Retail Loans Market); and (b) “the market for provision of wholesale loans in India” (Wholesale Loans Market). Further, at a narrower level, within the Retail Loans Market, the Parties exhibit overlap in the following relevant markets: (i) “the market for provision of vehicle/ auto loans in India” (Vehicle Loans Market); and (ii) “the market for provision of MSME loans in India” (MSME Loans Market). At the narrowest level, within the Vehicle Loans Market, the Parties exhibit overlap in the following relevant markets: “the market for provision of four-wheeler passenger car loans in India” (Four-wheeler Passenger Car Loans Market); and “the market for provision of commercial vehicle loans in India” (Commercial Vehicle Loans Market).

10. It is submitted that there are no vertical or complementary relationships (either existing or potential) between the business activities of TCL/ Tata Group entities (that meet the Materiality Threshold and have presence in India) vis-a-vis TMFL.

11. The Commission decides to leave precise delineation of the relevant market open, as it was observed that because of the reasons stated below, the Proposed Combination is not likely to result in appreciable adverse effect on competition irrespective of the manner in which the relevant market is delineated.

12. Based on the submissions of the Parties, it is noted that the combined market shares in all relevant markets, except in the Commercial Vehicle Loans Market, are in the range of [0-5] %. In Commercial Vehicle Loans Market, the combined market share is in the range of [5-10] %; however, the incremental market share is less than 1%. Further, each of the relevant markets has presence of other players such as State Bank of India, HDFC Bank, ICICI Bank, etc.

13. 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 sub-section (4) Section 20 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.

14. This order may stand revoked if, at any time, the information provided by the Acquirer is found to be incorrect.

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

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