Torrent Power Limited

Page 1 of 22 COMPETITION COMMISSION OF INDIA 14th January 2025 Proceedings against Torrent Power Limited under Section 43A of the Competition Act, 2002 CORAM: Ms. Ravneet Kaur Chairperson Mr. Anil Agrawal Member Ms. Sweta Kakkad Member Mr. Deepak Anurag Member Appearances: Mr. Rajshekhar Rao, Senior Advocate; Mr. Manas K. Chaudhuri, Advocate; Mr. Soham Banerjee, Advocate; Mr. Nilav Banerjee, Advocate; Mr. Pranjal Prateek, Advocate; Ms. Meherunnisa Anand Jaitley, Advocate; Mr. Rahul Shah, Company Secretary, Torrent Power Limited; and Mr. Sudhir Sharma, Manager (Corporate Relations), Torrent Power Limited. Order under Section 43A of the Competition Act, 2002 A. Background 1. The Competition Commission of India (Commission) in its meeting held on 18th May 2023 had noted that as per information available in public domain, Torrent Power Limited (TPL/Acquirer) had acquired 51% shareholding of Dadra and Nagar Haveli and Daman and Diu Power Distribution Corporation Limited (Target) [TPL and the Target are collectively referred to as Parties]. Accordingly, the Commission directed TPL to furnish certain information and documents in relation to the said acquisition under Section 36(4) of the Competition Act, 2002 (Competition Act) to assess whether further proceeding is required under Section 20(1) and/or Section 43A of the Competition Act. The directions of the Commission were communicated to TPL vide letter dated 24th May 2023. Page 2 of 22 2. On 23rd June 2023, TPL submitted its response wherein it was stated that the transaction pertained to the acquisition of 51% shareholding1 of the Target by TPL for a consideration of INR 555 crore. The remainder of 49% shareholding in the Target was held by the Administrator of the Union Territory (UT) of Dadra and Nagar Haveli and Daman and Diu (DNH-DD) (Administrator). Further, it was stated that the Target was incorporated on 8th March 2022 by consolidating: (i) the Electricity Department, engaged in power distribution & retail supply of electricity in Daman & Diu districts of UT (Electricity Department-DD), and (ii) DNH Power Distribution Corporation Limited (DNH PDCL), by way of the Dadra and Nagar Haveli and Daman and Diu Electricity (Reorganisation and Reforms) Transfer Scheme, 2022 (Transfer Scheme)2 pursuant to Sections 131, 133 and 134 of the Electricity Act, 2003 (Electricity Act). 3. Upon perusal of the response, it was noted that the information provided was incomplete as the audited relevant assets and turnover of the business transferred to the Target was not provided. Therefore, letters dated 12th July 2023 and 10th August 2023 was issued to TPL to submit the complete details regarding value of relevant assets and turnover of the business transferred to it (certified by the statutory auditor), in terms of the Ministry of Corporate Affairs Notification dated 27th March 2017 – S.O. 988(E). The response to same were received on 1st August 2023 and 22nd September 2023, respectively. B. Submissions of the Acquirer Description of the Parties 4. Acquirer: TPL is a public listed company incorporated in 2004 in Ahmedabad, Gujarat. It is an integrated power sector player in India engaged in the business of power generation, transmission and distribution. It has a thermal power generation capacity of 3092 MW with a mix of coal and gas-based power plants. It also operates in the renewable energy segment with 1068 MW capacity taking the aggregate installed generation capacity to 4160 MW. In relation to power transmission, it is stated that TPL has set up 249 km and 105 km 400 KV double circuit transmission lines for evacuating power generated at its generating plants to various off-take centres. It also has 128 km 220 KV double circuit extra high voltage lines from generating station to its own distribution area. Further, it distributes power as licensee in following states/UT: (i) Gujarat (in the cities of Ahmedabad, Surat, Gandhinagar, Dahej SEZ, Dholera SIR); (ii) UT of DNH-DD; (iii) Maharashtra (in Bhiwandi, Shil, Mumbra) as franchisee and; (iv) Uttar Pradesh (in Agra). 1 This constitutes 51,000 equity shares of the Target. 2 Date of Gazette notification for the Transfer Scheme 9th March 2022. Page 3 of 22 5. Target: The Target is a 100% subsidiary of UT of DNH-DD. It has been set up to undertake the business of power distribution and retail supply of electricity in UT of DNH-DD. Sequence of Events 6. By way of a background, it was inter alia submitted that: a. The Transaction was undertaken as part of the larger structural reforms contemplated by the Government of India in the power sector to privatise the distribution of power. b. Prior to the Transaction, the distribution of electricity in the UT of DNH-DD was undertaken by two distinct entities viz., the Electricity Department-DD and DNH PDCL (a wholly owned entity of the UT of DNH-DD). c. On 8th December 2020, the bid authority initiated a bidding process through the issuance of a Request for Proposal (RFP) to consolidate the assets, liabilities, rights, functions, obligations, proceedings, and personnel of the Electricity Department-DD and DNH PDCL to form the Target and subsequently, sell 51% shareholding in the Target to a third party. d. RFP was issued by Executive Engineer, Electricity Department-DD, Daman for selection of bidder for purchase of 51% shares in Target which would be responsible for distribution and retail supply of electricity and having distribution license in UT of DNH-DD. e. Further to the RFP, TPL submitted its bid (comprising technical and financial proposals) on 3rd February 2021 along with a bid security amount of INR 30 crore. On 20th February 2021, bids were opened and TPL emerged as the H1 bidder. f. Subsequently, the bidding process was kept in abeyance owing to a Public Interest Litigation being filed before the Hon’ble Bombay High Court. g. Thereafter, on 7th February 2022, a Letter of Intent (LOI) was issued in favour of TPL by the bid authority for TPL’s execution within 7 calendar days of issuance of the LOI. The issuance of the LOI allowed TPL to undertake the Transaction. h. Inter alia, pursuant to the execution of the LOI, as per clause 6.6.1.(c) of the RFP, TPL was to submit the consideration amount of INR 555 crore to the bid authority within 30 days of the issuance of the LOI and failure to do so would amount to: (i) disqualification of TPL as the successful bidder and (ii) forfeiture of the bid security amount of INR 30 crore. Accordingly, INR 43.65 crore of the consideration amount was paid by TPL on 25th February 2022 and remaining amount of INR 511.35 crore was paid on 26th February 2022. i. Post the execution of the LOI, the Government of the UT of DNH-DD, by way of the Transfer Scheme dated 9th March 2022 merged the Electricity Department-DD and DNH PDCL to create the Target to facilitate the Transaction. Page 4 of 22 j. Subsequently, TPL, the Target and the UT Administration of DNH-DD through its Secretary of Power entered into (i) Shareholders Agreement (SHA) and (ii) Share Purchase Agreement (SPA) on 15th March 2022. Relevant Assets and Turnover 7. Initially, it was submitted that since the Target was incorporated by the Government of the UT of DNH-DD pursuant to the Transfer Scheme for the purposes of the Transaction in FY 2021-22 as a new entity, it had no operations in previous two years and therefore the financial statements of the Target were not available. Therefore, only the asset and turnover details of TPL (Standalone and Consolidated) for FY ended 31st March 2021 were provided as below: