UltraTech Cement Limited

Page 1 of 18 COMPETITION COMMISSION OF INDIA (Combination Registration No. C-2024/09/1185) 20th December 2024 Notice under Section 6(2) of the Competition Act, 2002 given by UltraTech Cement 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 I. Background 1. On 12th September 2024, the Competition Commission of India (Commission) received a Notice under Section 6(2) of the Competition Act, 2002 (Act), given by UltraTech Cement Limited (Acquirer/UltraTech) in relation to UltraTech’s proposed acquisition of: (i) 32.72 percent of the paid-up equity share capital of The India Cements Limited (India Cements/Target) by way of the Primary Acquisition (as defined below), and (ii) up to 26 percent of the paid-up equity share capital of India Cements by way of the Open Offer (as defined below) [Proposed Combination]. 2. The Primary Acquisition involves: (i) acquisition of equity shares representing 21.98 percent of the total equity share capital of India Cements from EWS Finance & Investments Private Limited, Combination Registration No. C-2024/09/1185 Page 2 of 18 Srinivasan N, Chitra Srinivasan, Rupa Gurunath and S.K. Asokh Baalaje, who are the promoters and members of the promoter group of India Cements, by way of share purchase agreement dated 28th July 2024 (SPA 1) executed amongst UltraTech, EWS Finance & Investments Private Limited, Srinivasan N, Chitra Srinivasan, Rupa Gurunath and S.K. Asokh Baalaje; (ii) acquisition of equity shares representing 6.44 percent of the equity share capital of India Cements from Rupa Gurunath, Trustee of Security Services Trust and Rupa Gurunath, Trustee of Financial Service Trust, who are members of the promoter group of India Cements, by way of share purchase agreement dated 28th July 2024 (SPA 2) executed amongst UltraTech; Rupa Gurunath, Trustee of Security Services Trust; and Rupa Gurunath, Trustee of Financial Service Trust; and (iii) acquisition of equity shares representing 4.30 percent of the equity share capital of India Cements from Sri Saradha Logistics Private Limited, by way of share purchase agreement dated 28th July 2024 (SPA 3) executed between UltraTech and Sri Saradha Logistics Private Limited. (Hereinafter, SPA 1, SPA 2 and SPA 3 are collectively referred to as “Transaction Documents”) 3. The execution and signing of the Transaction Documents attract the provisions of Regulations 3(1) and 4 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, as amended (SAST Regulations), to launch an “open offer” by UltraTech. Accordingly, UltraTech has launched an open offer to the public shareholders of India Cements to acquire equity shares constituting up to 26 percent of the equity share capital of India Cements (Open Offer). 4. In terms of Regulation 14 of the Competition Commission of India (Combinations) Regulations, 2024 (Combination Regulations), vide letter dated 26th September 2024 (RFI 1), the Acquirer was required to provide certain information/document(s) by 3rd Combination Registration No. C-2024/09/1185 Page 3 of 18 October 2024. The Acquirer filed its reply on 14th October 2024, after seeking extension of time (Response 1). As certain defects and discrepancies were observed on examination of Response 1, vide letter dated 21st October 2024, in continuation of RFI 1 and Response 1 (RFI 2), the Acquirer was again asked to remove defect(s), explain discrepancies and furnish requisite information by 28th October 2024. The Acquirer filed its reply on 11th November 2024, after seeking extension of time (Response 2). II. Parties to the Combination 5. UltraTech, a public listed company, is a subsidiary of Grasim Industries Limited (Grasim). Both Grasim and UltraTech are flagship companies of the ‘Aditya Birla conglomerate’. UltraTech is engaged in the manufacture of grey cement, white cement, ready mix concrete (RMC), clinker, building products and provision of building solutions in India. As submitted, as of 30th June 2024, UltraTech has an installed capacity of 149.46 MTPA of grey cement in India and post the acquisition of Kesoram Cement Business, UltraTech will have an installed capacity of 160.21 MTPA of grey cement in India1. 6. India Cements, a public listed company, is, inter alia, engaged in the manufacture and sale of grey cement and RMC in India. As submitted, India Cements has a total of nine (9) grey cement plants with a total capacity of manufacturing 14.45 MTPA of grey cement in India. III. Notice under Section 29(1) of the Act 7. The Commission considered the activities of UltraTech and India Cements and identified overlapping product segments of cement and RMC as relevant for competition assessment. 1 Kesoram Cement Business includes an integrated grey cement unit located at Sedam, Karnataka (having an installed capacity of 9 MTPA) and an integrated grey cement unit located at Basantnagar, Telangana (having an installed capacity of 1.75 MTPA). The acquisition of Kesoram Cement Business by UltraTech (Kesoram Acquisition) was notified and was approved by the Commission vide its order dated 19th March 2024 (Kesoram Approval Order). As submitted, the NCLT approval for the same was pending on the date of filing of Notice. Combination Registration No. C-2024/09/1185 Page 4 of 18 8. The Commission, in its meeting held on 3rd December 2024, considered the information on record, details provided in the notice and the responses filed by the Acquirer, and formed a prima facie opinion that the Proposed Combination is likely to cause an appreciable adverse effect on competition (AAEC) in a relevant market for grey cement delineated for the purpose of assessment of the Proposed Combination. Accordingly, in terms of Section 29(1) of the Act, a show-cause notice dated 5th December 2024 (SCN) was issued to the Acquirer, wherein the Acquirer was directed to respond in writing, within 15 days of the receipt of the SCN, as to why investigation in respect of the Proposed Combination should not be conducted. 9. The Acquirer filed the response to the SCN on 16th December 2024 (Response to SCN). As part of Response to SCN, the Acquirer also requested for an opportunity to present its case by way of an oral hearing. The request of the Acquirer was granted, and the Commission heard the Acquirer at length on 19th December 2024 (Oral Hearing). 10. Thereafter, the Commission, in its meeting held on 20th December 2024, considered and assessed the Proposed Combination. Considering the material on record, including the Response to SCN, the submissions made by the Acquirer during the Oral Hearing and factors provided under Section 20(4) of the Act, the Commission formed the opinion that the Proposed Combination is not likely to have AAEC in India and accordingly, decided to approve the same under Section 31(1) of the Act. The analysis and findings of the Commission in respect of competition assessment of the Proposed Combination are given hereunder. IV. Competition Assessment - Cement Relevant Product Market 11. The Commission noted that there are two varieties of cement, i.e., grey cement and white cement. Within the category of grey cement, there are different variants of cement such as Ordinary Portland Cement, Portland Pozzolona Cement, Portland Slag Combination Registration No. C-2024/09/1185 Page 5 of 18 Cement etc. As regards the variants of grey cement, the Commission, in its earlier decisions2, has noted that different varieties of grey cement are considered to be largely interchangeable. The white cement is considered to constitute a different market, basis its characteristics, price and intended use. However, as stated in the notice, India Cements has neither manufactured nor sold white cement post FY 2020 and does not intend to manufacture and/or sell white cement in the future. Accordingly, the relevant product market for the purposes of assessment of the Proposed Combination is defined as the market for grey cement.