AGI Greenpac Limited — Combination C-2022/11/983

COMPETITION COMMISSION OF INDIA 15 March 2023 Notice under Section 6(2) of the Competition Act, 2002 given by AGI Greenpac Limited

CORAM: Ms. Sangeeta Verma Acting Chairperson

Mr. Bhagwant Singh Bishnoi Member Order under Section 31(1) of the Competition Act, 2002

I. Background

1. On 3 November 2022, the Competition Commission of India (Commission) received a notice (Notice) under Section 6(2) of the Competition Act, 2002 (Act), given by AGI Greenpac Limited (AGI Greenpac/AGI/Acquirer) in relation to the proposed acquisition of up to 100 percent of the equity share capital of Hindusthan National Glass & Industries Limited (HNG/Target), which is currently undergoing corporate insolvency resolution process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC) (Proposed Transaction) (hereinafter, the Acquirer and Target are collectively referred to as the Parties). The Notice was filed pursuant to the submission of a resolution plan for HNG before the Resolution Professional dated 21 July 2022, which was amended and restated and submitted on 26 September 2022 (Resolution Plan).

2. The Commission noted that a notice had been filed by the Acquirer earlier, on 27 September 2022 (assigned Combination Regn. No. C-2022/09/972), for the same transaction. However, on consideration of the same, the Commission, inter alia, observed that the information provided in the notice may not be sufficient to carry out comprehensive analysis and further information may be required, in absence of which, there may be a possibility of an incorrect assessment. It was further noted that the notice had been filed in Form I, and not in Form II, although the combined market share of the parties in one of the plausible markets identified in the notice could be more than 15 percent after the proposed combination. As per the Regulation 5(3) of the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (Combination Regulations), notice should preferably have been filed in Form II. Accordingly, vide letter dated 17 October 2022, the Commission directed the Acquirer to file a fresh notice in Form II in terms of Regulation 5(5) of the Combination Regulations. In accordance with the directions of the Commission, the Acquirer filed the Notice.

3. In terms of Regulation 14 of the Combination Regulations, vide letter dated 17 November 2022 (RFI), the Acquirer was required to provide certain information/document(s) latest by 24 November 2022. The Acquirer filed its reply on 9 December 2022, after seeking extension of time (Response to RFI). Certain additional submissions were also made by the Acquirer vide letter dated 19 December 2022. As the Notice and Response to RFI was still incomplete, vide letter dated 28 December 2022 issued in continuation of the RFI, the Acquirer was required to remove the defect(s) and provide requisite information latest by 02 January 2023. The Acquirer submitted the response on time.

II. Parties to the Combination

AGI

4. AGI, (formerly known as HSIL Limited), is a subsidiary of Somany Impresa Limited. Somany Impresa Limited is the flagship company holding direct or indirect shareholdings in various subsidiaries, group companies, and affiliates (collectively, the Somany Impresa Group) engaged in activities such as manufacture and supply of glass containers, polyethylene terephthalate (PET) bottles, caps and closures, consumer appliances, sanitary ware, faucets and PVC pipes. The shares of AGI are listed and publicly traded on the National Stock Exchange of India Limited (NSE) and BSE Limited (BSE).

5. AGI is engaged in the manufacture of glass containers in India with two manufacturing plants in Telangana, catering to the needs of a broad range of industries such as alco-beverage, cosmetics and perfumery, pharmaceutical, food and beverages (F&B), non-alcoholic beverages. Apart from glass containers, AGI also manufactures PET bottles and caps and closures.

HNG

6. HNG, listed on NSE, BSE and the Calcutta Stock Exchange Limited (CSE), is engaged in the manufacture and supply of container glass and is a player in India’s container glass segment of the packaging industry, offering a complete packaging solution to customers. Like AGI, HNG also caters to a broad range of industries, including F&B, pharmaceutical and wellness, alco-beverage and household and cosmetics. Its manufacturing plants are located at Rishra, Bahadurgarh, Rishikesh, Neemrana, Sinnar, Naidupeta and Puducherry.

III. Notice under Section 29(1) of the Act

7. The Commission, in its meeting held on 9 February 2023, 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 Transaction is likely to cause an appreciable adverse effect on competition (AAEC) in relevant market(s) in India. Accordingly, in terms of Section 29(1) of the Act, a show-cause notice dated 10 February 2023 (SCN) was issued to the Acquirer, wherein the Acquirer was directed to respond in writing, within 30 days of the receipt of the SCN, as to why investigation in respect of the Proposed Transaction should not be conducted.

8. The Acquirer filed the response to the SCN on 10 March 2023 (Response to SCN). As part of the Response to SCN, without prejudice to the submissions that the Proposed

Transaction does not cause any AAEC in India, the Acquirer offered to divest the Rishikesh plant of HNG as a voluntary modification under Regulation 25(1A) of the Combination Regulations to alleviate the prima facie concerns of the Commission as expressed in the SCN. Subsequently, on 14 March 2023, the Acquirer, vide two separate submissions, provided additional clarifications regarding the terms of voluntary modification and made certain minor revisions to the voluntary modification. The Acquirer further requested the Commission to consider the additional clarifications and revisions as part of Response to SCN itself and condone a delay of one day in the submissions of Response to SCN. The Commission took the additional clarifications and revisions on record as forming part of Response to SCN (accordingly, hereinafter, the voluntary modifications offered as part of Response to SCN, read with the additional clarifications and revisions made, is referred to as the Modification).

9. The Commission, in its meeting held on 15 March 2023, considered and assessed the Proposed Transaction. The analysis and findings of the Commission in respect of the competition assessment of the Proposed Transaction are given hereunder.

IV. Activities of the Parties and areas of horizontal overlaps/vertical relationships

10. The activities of AGI and HNG relate to the manufacture and sale/supply of packaging materials at the broader level. While both AGI and HNG are engaged in the segment of manufacture and supply of glass containers, AGI is also engaged in the manufacture and sale of other packaging products, viz., PET bottles and products and security caps and closures. As stated above, their products cater to broad range of industries, including F&B, pharmaceutical and wellness, alco-beverage and household and cosmetics.

11. Considering the activities of AGI and HNG as detailed above, the Proposed Transaction involves horizontal overlaps in the broader packaging materials segment and potential vertical/complementary relationships considering the activities of packaging products offered by both AGI and HNG and activities relating to the manufacture and sale of security caps and closures offered by AGI.

12. The Proposed Transaction has been assessed accordingly.

V. Competition assessment: Packaging materials

13. The first step in the assessment of horizontal overlaps is the delineation of relevant product and relevant geographic market which is followed by assessment of the impact of the Proposed Transaction for likelihood of any AAEC.

Delineation of Relevant Market

14. The objective of delineation of relevant market is to identify a frame of reference, given the area of horizontal overlaps, which facilitates competition assessment to be undertaken. Needless to say, the endeavour of defining such a frame of reference is the identification of the most relevant competitive constraints for the combined entity. The exercise entails an understanding of the macro aspects of the broader sector and micro aspects of the products and services. It would thus be appropriate to understand, at the outset, the overall packaging and packaging materials market before going into the delineation of relevant market(s).

15. Packaging is essential to protect, preserve, merchandise, market and distribute products. Packaging plays a vital role in how the products reach the consumers in safe and required form without any compromise in quality. Apart from safe delivery, packaging is also understood to be a significant factor which impacts and caters to consumer perceptions. From a seller’s perspective, packaging helps in product positioning, while from consumer’s perspective, packaging is critical for various factors, ranging from the look and feel to ease of carrying/usage. Considering the significance of packaging to the producer and consumer alike, the choice of a form/type of packaging by a seller is a complex decision which must factor all these variables, and accordingly, the relevant market delineation should consider these factors in totality to obtain a more holistic and realistic picture.

16. As a first step towards gaining a holistic picture, it is noted that there are three broad dimensions of packaging which are required to be considered, viz., (i) forms/types/designs of packaging, (ii) types of packaging materials and (iii) classification/types of industrial-users.

Classification in terms of forms/types/designs of packaging

17. Going by the form/type/design, packaging can be classified into the following two broad categories: (i) Flexible/collapsible packaging, which means any package or part of a packaging whose shape can be readily changed, for example, bags, pouches, and tubes. These are produced by combining the highest qualities of film, paper, plastic and aluminium foil to provide a wide range of protective characteristics; and (ii) Rigid container packaging, which includes packaging products made using material that exhibit no elastic deformation and perfect plastic deformation. As such, these products are hard and retain their shape. Rigid packaging includes paper and paperboard, glass, plastic and aluminium packaging materials.

Classification in terms of packaging materials

18. The next relevant aspect is considering various substrates/materials used for flexible packaging and rigid packaging. The substrates/materials can be classified, inter-alia, in the following categories: (i) Glass packaging: These packages are made of glass and are heavy and delicate in nature and rigid by design. These are in the form of bottles, jars, drinkware and bowls; (ii) Plastic packaging: These packages are made of plastic and capable of taking both the forms of packaging viz., rigid and flexible. Rigid plastic packaging involves the utilisation of plastic materials such as polypropylene, high-density polyethylene, and polyethylene (PET) for the packaging of new bottles and containers, while flexible plastic packaging is made from high-grade polymers such as PVC, polyamide, PP and PET; (iii) Metal packaging: These packages are hard and made of metals such as aluminium, steel and copper. Metal packages are more durable and heavier and provide a strong protective barrier. These can be found in the form of containers and bottles; (iv) Board packaging: Paper board is a thick, paper-based material that is generally thicker than regular paper. Paperboard comes in several different grades that possess unique characteristics, making each grade suitable for different requirements and needs, such as cereal, medicinal and cosmetic boxes; and (v) Other packaging: With evolving technology, the packaging industry offers various products made of new technologies, such as boxes made of wheat residuals, fabrics and jute bags.

End-user classification of packaging materials

19. Packaging materials are used by a range of industries. The industrial users of packaging materials can be classified into four broader categories considering the general industry practices, viz., (i) F&B; (ii) pharmaceuticals and wellness; (iii) alco-beverages; and (iv) household and cosmetics. Apart from the aforesaid classification in terms of categories of end-products, another classification can be made in terms of product positioning. As per this approach, based on end-use, classification can be made on the basis of aspects such as premiumisation or the specific requirements of particular industrial users.

20. Against this backdrop, the issue of delineation of relevant market can be examined.

Delineation of relevant product market

21. As against the aforesaid classifications, the Acquirer proposed looking at packaging materials based on the nature of the product that needs to be packaged. Accordingly, the Acquirer proposed defining the market in terms of liquid packaging. It was submitted that liquid packaging products made from different products, viz., PET bottles, glass bottles, aluminium/metal cans, aseptic packaging and tetra packs can be considered substitutable and interchangeable, and the relevant product market should be delineated as ‘market for the manufacture and supply of liquid packaging’, without any further segmentation in terms of type of material used for liquid packaging and also without any segmentation in terms of industrial user segments viz., F&B, pharmaceuticals, alco-beverage and household & cosmetics.

22. The Commission observed that the classification ‘liquid packaging’ does not appear to be a very apt classification because container glass apart from bottles can take various other forms, viz., jars, bowls, etc., which can be used for packaging both liquid and solid products. Accordingly, liquid packaging does not appear to appropriately describe the products manufactured and sold by AGI and HNG. Nonetheless, regardless of nomenclature, the Commission noted that the definition proposed by the Acquirer implies that there is neither any distinction between the various packaging materials nor any significance of its use by the industrial user or end-consumer.

23. The Commission noted that the Act defines relevant product market as:

“a market comprising all those products or services which are regarded as interchangeable or substitutable by the consumer, by reason of characteristics of the products or services, their prices and intended use”.

Accordingly, the Commission examined the issue of the delineation of relevant market in terms of characteristics, price and intended use.

Analysis in terms of characteristics of different substrates

24. The characteristic features of various substrates, viz., glass, plastic, cardboard and metal cans, are different. Based on the Acquirer’s own submissions, it is observed that different materials have their distinctive characteristics, offering their own set of advantages and disadvantages. To illustrate, while plastic, cardboard and aluminium cans have a weight advantage where glass has a disadvantage in this area, or all packaging materials except cardboard offer moisture protection and provide a barrier against CO2, oxygen and odours, but transparency can only be provided by plastic, glass, etc. The aforesaid differences in characteristics and the resulting advantages/disadvantages of various packaging materials point to a lack of across-the-board substitutability of various packaging materials, as it seems rational that user choice would be guided by the relative advantages/disadvantages offered by various packaging materials.

25. Further, it is important to note that packaging is not the end-product but a medium for a user to reach the end-consumer of the product, and therefore, factors relating to the nature of the product, product positioning and other such factors underlying the business model of the industrial user should also be considered relevant in the choice of packaging material, as it is a derived demand. Accordingly, considering that the activities of AGI and HNG primarily overlap in the segment of glass containers, the Commission undertook a holistic assessment of the substitutability of glass containers with other packaging material options, duly factoring in the relative advantages/disadvantages of packaging materials and the user perspective in the delineation of the relevant market.

26. The Commission observed as under:

(i) Recycling: Glass is 100% recyclable and new products made from its recycled material do not lose integrity in the recycling process. The Acquirer submitted that the leading beverage manufacturer, Coca Cola, announced that it is shifting to glass bottles after years of focusing on disposable plastic bottles. It was stated that, based on interviews of top company executives, it appears that the purpose of the change is to reduce packaging costs and reach out to more consumers. As the price of a glass container in absolute terms is more than the price of a plastic container or a metal can, the Acquirer, while trying to emphasise the aspect of recycling, submitted that glass bottles are reused multiple times (typically around seven to eight times), and therefore, the effective price of packaging per bottle is much lower than the actual price of a new glass bottle.

(ii) Barrier against CO2 and oxygen: While the Acquirer submitted that plastic, metal cans and glass all offer high barrier against CO2 and oxygen, it is relevant to note that, as stated in the Annual Report of HNG, glass is sustainable, chemically inert, non-porous and impermeable. 1 Considering the same characterises, the Annual Report further notes that pharmaceutical, alcoholic drinks and chemical industries prefers glass packaging because of the inert nature of glass bottles and also premium food & beverage brands mostly prefer container glass over other packaging options such as plastics2. Similar statements can be observed in the industry analysis report published in July 2020 titled “The Consumer Packaging Markets in India” [by Madras Consultancy Group] and submitted by the Acquirer. The report notes that:

“Packing beer in PET bottles is challenge as beer is an oxygen sensitive product; Bericap has developed closure in ‘crown cork design’ that can absorb oxygen in the headspace of the beer bottle. PET bottles fitted with Bericap DoubleSealTM SuperShorty® Crown O2 have been introduced in India. Demand for beer in PET bottles in India is limited” (emphasises added)

(iii) Look and aesthetics: As per the information available on the website of HNG3:

“Glass packaging makes a product visually appealing; they are much more attractive than plastic or paperboard packaging”. Further, “Glass packaging not only helps in preserving the products, but also preserving brand image of that product”. As noted in the Annual Report of AGI4, “Glass packaging is a premium and one of the most trusted forms of packaging for health, taste, and environmental safety ”. It has also been noted that “[T]his ensures its 1 Page 5 of Annual report of HNG 2 Ibid 3 https://www.hngil.com/p/premium-look-1 4 Page 39 of Annual report of AGI continuous usage worldwide, across a range of end-user industries, despite the heavy competition from other packaging materials”5. Similar observations have been made in the Annual Report of HNG. The Annual Report of HNG notes:

“Share of glass packaging in IMFL is expected to increase due to following factors. 1) Premium segments which constitute more than 40% of IMFL volume uses 100% glass packaging. The share of this segment is expected to grow to 67% of volume by 2027 and hence the overall share of glass packaging in IMFL will also increase. 2) In the Mass / Popular segment, the share of glass bottles has reduced due to emergence of cheap alternate PET bottles. However, revenue leakages and ill effects on health are forcing state governments to turn back to glass packaging in liquor in phased manner.6

Premium Food & Beverage brands mostly prefer container glass over other packaging options such as plastics, as glass is sustainable, chemically inert, non-porous and impermeable.7”

(iv) Odour and freshness of products packaged: As per the information available on the website of HNG:

“Glass packaging does not absorb any kind of smell, which is why it is able to ensure that the product inside maintains its original aroma and flavour. This is because glass has no chemicals in it, as opposed to plastic containers! Plastic packaging often gets stained by the food stored inside it, not just that, but plastic also fails to preserve the aroma and flavor of the food. This is a very strong reason why glass containers are ideal for storing all kind of foods. The surface of a glass container is glossier, and thus it helps the food stay fresh and smell good for longer period”.8

5 Page 39 of Annual report of AGI 6 Page 7 of the Annual report of HNG 7 Page 4 of the Annual Report of HNG 8 https://www.hngil.com/p/lasting-freshness-aroma-1 (v) Safe storage factor and aspect of contamination: As per the information available on the website of HNG:

“[T]he packaging of glass container is such that the moisture is less likely to get inside it, thus keeping your food safe. Unless the glass is physically broken, your food won’t be contaminated, which plastic packaging is capable of doing.

For packaging products, glass is always a secured option because plastic can melt and it carries the risks of chemical leakage into your eatables. A glass consumer does not have to worry about chemicals or other contaminants because glass is made from natural materials and it is chemically inert (made from reactive chemicals). This helps in keeping your food fresh for longer period”9

27. The aforesaid observations indicate that the substrates are very different from each other and cannot be considered substitutable. These observations also bring out the uniqueness of glass as a packaging material. While on the one hand, glass packaging appears to be suited for certain product segments, viz., alco-beverages, given its characteristics, on the other hand, there are indications that glass is associated with premium look and aesthetics, and therefore, may be a packaging material of choice for users/sellers across product segments who are eyeing the premium positioning of their products.

Analysis in terms of price of various substrates

28. The Acquirer submitted the prices of containers made from various packaging materials such as glass, plastic, aluminium cans/tins and tetra packs for certain indicative products across user segments. The data submitted by the Acquirer was examined and it is observed that there are certain inconsistencies in data owing, to some

9 https://www.hngil.com/p/preserves-flavour-1 extent, to differences in capacities in terms of volume/weight of the products considered for illustrative purposes across substrates or some other errors apparent. Notwithstanding the discrepancies, the conclusions of the Parties on this aspect were examined further.

29. The Acquirer, based on the pricing data, submitted that the difference in prices of glass, metal cans and plastic containers is insignificant to constitute separate relevant markets. Further, as stated, the price of the containers constitutes an insignificant portion compared to the price of the end product. Considering the aforesaid, it was stated that liquid manufacturers can switch from one liquid packaging material to another without impacting the price of the end product sold to the consumers in the market. It has been further stated that companies have, over the years, been (partially or fully) shifting from one liquid packaging material to another in order to reduce costs.

30. With respect to the above submission, the Commission observed that, first and foremost, there are significant differences in absolute costs of various substrates. Further, if the absolute differences in costs are seen in the light of reuse of glass and likely reduced effective cost of packaging, the conclusions reached by the Acquirer appear to be inconsistent. It appears more plausible that, if the price differences are insignificant and/or constitute an insignificant part of the price of the end product, the price would cease to be a relevant decision factor, rather, the user would be expected to choose the most relevant substrate for its product offering. This observation also appears to be more consistent with the observations made above regarding glass being a preferred packaging for certain products on account of its characteristics as opposed to the submission of the Acquirer along the lines that users of container glass are indifferent between packaging materials and are accordingly, guided by price.

31. Overall, it appears that price may indeed not be of much relevance, but that does not imply or reflect the substitutability of substrates. Instead, the choice of a particular substrate or multiple substrates as a decision seems more relevant to the overall business model of the user, and in those terms, the characteristics of the substrates acquire more relevance. Accordingly, if the user’s product is such that it requires packaging in a glass container, the user would do the same. The aforesaid decision-making does not appear to be rooted very strongly in the absolute/relative price differences of various packaging material substrates. Accordingly, the user of a glass container is not likely to substitute container glass with other packaging material purely on account of a small but significant non-transitory increase in price of container glass.

Analysis in terms of Intended Use

32. The Acquirer submitted that, from the perspective of the customers of the Parties across various user segments, liquid packaging products made from different products are substitutable with each other. The Acquirer gave a few examples to illustrate such substitutability: i. For non-alcoholic beverages, it was stated that fruit drinks are sold in tetra packs, cans as well as glass bottles. The leading non-alcoholic beverage, Coca Cola, is sold in glass bottles, aluminium cans as well as PET bottles. Similarly, liquid food items such as milk are sold in the market in glass bottles, tetra packs, pouches or cartons, while pickles, which have a significant liquid content, are also packed in glass containers, plastic containers and flexible packaging containers; ii. For pharmaceutical products, it was stated that these are also packed in a range of products made from different substrates, including PET bottles, glass bottles and aseptic packaging. In this regard, it has been submitted that, with an increase in the usage of aseptic packaging, pharmaceutical industry is also utilising the same for packaging; iii. As regards the alco-beverage industry, it was stated that several leading alcohol manufacturers are also shifting to packaging containers made from different materials in addition to glass containers. To illustrate, it was stated that, Diageo, which owns the popular Johnnie Walker whiskey, is planning to switch from glass bottles to paper-based bottles. It was also stated that alcohol producers are packaging their products in tetra packs, cans and plastics as an alternative to conventional glass containers. Based on the same, it was stated that, from the perspective of alcohol producers, different liquid packaging materials are substitutable and that the use of different packaging formats does not affect the quality of the liquid.

33. Emphasising the functional substitutability and intended use part in delineation of relevant markets, the Acquirer submitted that, as different packaging materials fulfil the same economic needs of customers in the packaging industry, liquid packaging made from different materials would form part of the same relevant product market and the differences in the materials would not outweigh the intended use of the said packaging materials, and all materials used for packaging liquids would form part of the same relevant market.

34. The Acquirer’s inference, that different packaging materials fulfil the same economic need of the customers, drawn from users shifting fully or partially to another substrate for packaging, does not appear correct. It completely ignores that the demand for packaging materials primarily being a derived demand, the users of packaging material follow their own business model and, therefore, their choices are expected to be guided by multiple parameters and not simply based on functional substitutability. The classification in terms of material characteristics have already been discussed, which have brought out the aspect of glass being a preferred choice for certain product categories. Accordingly, it would be counter-intuitive to assume that an enterprise which has based its business model on glass as a packaging medium will consider that other packaging materials will serve the same economic need. Accordingly, as far as the instances of full/partial shifting between substrates are concerned, it does not appear plausible to consider that the same was only due to price differences between various substrates; rather, it seems more reasonable to assume that such shift was in sync with the business model of the user.

35. The relevant market definition as contained in the Act stresses the delineation of relevant market based on collective assessment all three factors, viz., characteristics, price and intended use. Based on the aforesaid analysis, in terms of characteristics which are materially different for different packaging materials and prices which are different, and at the same time, not a very relevant factor considering the demands of different business models and industrial user preferences, each material substrate appears to constitute a relevant market on a standalone basis. Further, the functional substitutability appears either theoretical or, wherever full/partial substitution has been made, the same appears more a function of the business model of the user and less of the pricing dynamics of substrates.

36. The findings of the Commission on the uniqueness of each material substrate are also supported by the data in respect of market segmentation by material types as provided by the Acquirer based on Ken Research Market Study on India Liquid Packaging Market. As per the given information, the market share of all packaging materials (by volume) has been largely consistent for the period FY 2018 to FY 2022. [xxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx]. This stickiness is also demonstrative of the lack of substitution or substitutability across the board and that each material substrate is existing and growing in its own space.

37. The Acquirer in its Response to SCN, inter alia, reiterated that functional substitutability as represented in full/partial shift from container glass to other packaging materials is more relevant, and the same reflects the effect of physical characteristics. It was further submitted that the characteristics of glass containers considered by the Commission are not unique to glass but applicable to containers made from other packaging materials as well. The Acquirer also submitted that the observations of the Commission on glass being a packaging material of choice for sellers eyeing ‘premium’ positioning and the significance of business models to the effect of making functional substitutability as irrelevant, lacks basis. As regards the Commission relying on statements contained in Annual Reports/party websites, the Acquirer submitted that the Commission has not considered statements that highlight competition from other packaging materials.

38. The submissions of the Acquirer in Response to SCN were examined. The Commission is of the view that all the aspects of relevant market delineation start from the consumer perspective, and thus, before going into analysis in terms of characteristics, intended use or price, it is first relevant to understand the consumer perspective. Accordingly, the fact that packaging is not the end product but a medium for a user to reach the end consumer of the product of the user and, accordingly, its demand being in the nature of derived demand becomes highly relevant. This aspect requires that factors relating to the nature of product, product positioning, etc. underlying the business model of the industrial user should also be considered in assessment. In fact, the statements contained in Annual Reports of the Parties and as referred above duly capture the aspect of ‘business models’. The terms such as ‘premium food & beverage brands’ as referred in the Annual Report illustrate the importance of business models and the corresponding product positioning.

39. As regards the submissions on a selective reading of the Annual Report, the Commission observed that citing techno-commercial factors, the Annual Report of AGI noted, “[T]his ensures its continuous usage worldwide, across a range of end-user industries, despite the heavy competition from other packaging materials”. Thus, when the Annual Report talked of heavy competition, it also talked of continuous usage given techno-commercial factors, which again points to the significance of differences in characteristics and the importance of business models.

40. Accordingly, the Commission observed that, considering the activities of the Parties, the scope of plausible relevant market appears to be limited to container glass.

Assessment of need to further segment the relevant market by user/consumer

41. Considering the likely pervasiveness of the business models of various user groups and specific preferences as reflected in various statements contained in documents/websites of the Parties detailed above, the Commission further examined whether the relevant market needs to be further divided by user segments.

42. In this regard, the Acquirer stated that the Relevant Market ought not be further sub-segmented by user because, from a supply-side substitutability perspective, glass containers/bottles used by various user groups are substitutable. In this regard, the Acquirer submitted a letter from Bucher Emart Glass Pte. Ltd. (Bucher Emart) which is based out of Switzerland and is one of the world’s leading international suppliers of glass container manufacturing solutions, including equipment, controls, parts, and support.

43. First and foremost, it is important to note that demand side substitutability reflects the most immediate constraints on the parties and supply side substitutability can be considered only in situations where its effects mirror those of demand side substitutability. Accordingly, this aspect has first been examined in terms of demand side substitutability, and then in terms of supply side substitutability.

44. Based on the observations on the differences in characteristics of various substrates and specific preferences of packaging material of different user groups, it is clear that there is no demand homogeneity between various user segments for a particular packaging material. The requirements in terms of bottle shape, design, colour, aesthetics and volume capacity vary for different user segments. The standard bottles/containers are not used across segments. Further, these specific requirements or differences in glass container bottles have the impact of promoting specialisation in terms of production of such glass containers practically impacting the supply side substitutability as well which, to a large extent, is also reflected in the market structures of the supply of container glass to various user groups, which has been analysed in detail in subsequent parts of this order. The alco-beverage and F&B segments have HNG and AGI as leaders, while the household segment is led by Piramal Glass (PGP) Glass and pharma by Schott. This market structure is representative of actual market dynamics going beyond the theoretical possibility of supply-side substitution. The fact that players such as Schott do not have operations in alco-beverage or F&B suggests that specialisation is considered relevant and it is not a commoditised product both from demand and supply perspective. It may well be that the same machine can be used to produce container glass models for various user segments, and some of the producers such as AGI and HNG are indeed catering to all user segments, but the analysis suggests that this cannot be generalised and may not be representative of actual market dynamics. Considering all user segments as part of the same relevant market would imply the consideration of various producers of container glass as competitors in all user segments even though their product offerings may be suited only for a particular user segment and they chose to operate in those niche segments only.

45. On the supply side substitutability, the Commission considered the content of the Bucher Emart letter and observed that, [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxx These caveats relate to most important techno-commercial aspects and, therefore, highlight the limitations of substitutability from the supply perspective.

46. It emerges from the above that there is no demand side substitutability for container glass for various user segments and supply side substitution is at best limited and also not relevant. Accordingly, the Commission formed the prima facie view that it is appropriate to further segment the market by user segments and, thus, the relevant markets for assessment of the Proposed Transaction be delineated as separate markets for the manufacture and supply of container glass packaging products to the manufacturers of alco-beverage, cosmetics and perfumery, pharmaceuticals and F&B sub-segments, respectively.

47. In this regard, the Acquirer in its Response to SCN submitted that sub-segmenting the relevant market on the basis that different sub-segments have different market leaders is erroneous and again reiterated the supply side substitution between container glass required/supplied to various user segments to emphasise that the market need not be further segmented. However, in this regard, the Commission is of the view that such classification becomes relevant in situations where it is felt that the players on the supply side have an ability to discriminate between different consumer segments and, to this end, the Commission, as detailed above, observed that in the instant case, firstly, the products are not the same in terms of characteristics, etc.; secondly, the supply side substitutability is at best limited; and thirdly the significant differences in market structures at the segmental level imply that the ability to discriminate between segmental users cannot be ruled out.

48. Accordingly, the relevant product market for the purpose of competition assessment of the Proposed Transaction is required to be further segmented by user groups viz., alco-beverage, cosmetics and perfumery, pharmaceutical and F&B.

49. As regards the relevant geographic market, the Acquirer submitted that, at the broader level, the packaging industry could be considered global in nature, given the homogenous nature of the market. Further, it was stated that AGI and HNG supply packaging products all over the country and given, that the Competition Act requires the competition assessment to be in relation to India and the Commission in its previous decisions has also considered the relevant market to be the ‘whole of India’ in case of the packaging industry, the relevant geographic market may be considered the whole of India. The Acquirer made further submissions to support the pan-India market viz.: (i) the packaging materials are not perishable and can be easily transported within the territory of India; (ii) majority of the manufacturers have the capability to sell their packaging products throughout the country; (iii) there are no significant price differences between similar types of packaging products supplied within India; and (iv) there are no geographic barriers or differential tax regimes which impact the supply of such products across the country.

50. The Commission examined the plant-level dispatch data provided by the Acquirer for each of the plants of AGI and HNG. The Commission observed that, while some regional trends are discernible in the dispatch patterns, considering that the competition assessment is not impacted regardless of the sub-segmentation by geographical areas, this question can be left open and the Proposed Transaction can be assessed in overall pan India market.

51. Apart from the aforementioned segmentation, the Commission observed that the Parties are also engaged in the sale of general bottles through traders. Thus, the customers of the Parties may be classified in two segments, viz., the wholesale segment and the retail segment. The Commission considered it appropriate to accordingly classify the relevant market in terms of level of activity as well given general differences in competition dynamics in the wholesale and retail segments.

Competition assessment

Level of Concentration

52. The Acquirer provided estimates of market share of the Parties and their competitors in the market for container glass segment and each of the sub-segments of alco-bev, pharma, F&B and households and cosmetics products.

53. The following observations are made in this regard:

i. The combined share of the Parties in the market for manufacture and supply of container glass in India in terms of value and volume is estimated to be in the range of [35-40] percent with an increment of [10-15] percent and [40-45] percent with an increment of [10-15] percent, respectively, for FY 2022; ii. The HHI analysis on the basis of market shares for FY 2022 indicated that the Proposed Transaction significantly affects the level of concentration in the market, as reflected in the delta or the incremental HHI of around 700; and iii. The competitive structure of the market is also estimated to change significantly with the Proposed Transaction implying the merger of the top 2 players in the market with capacities/volumes which could have been expected to impose strong competitive constraints on each other. Post the Proposed Transaction, the second biggest player is expected to have a share of around 10 percent in terms of value and 6 percent in terms of volume.

54. Notwithstanding the fact that the aforesaid estimates given by the Parties are in themselves indicators of significant change in concentration, the Commission observed that the above market shares may be underestimating the presence of the Parties. As per varying estimates of market size and statements recorded in the Annual

Reports/websites of the Parties, the combined market shares may be in the range of [55-60] percent.

55. Thus, regardless of the data considered, the combined entity is likely to have a significant presence going forward, and the Proposed Transaction is likely to significantly increase the level of concentration in the relevant market for container glass in India.

56. As regards the analysis in terms of user segments, the Commission observed that, while all the sub-segments are concentrated, there appears to be a difference in the structure of the market regarding market leaders. In alco-beverage and F&B, the Parties are the market leaders, while the household & cosmetics segment is led by PGP and pharma is led by Schott. The combined share of the Parties in terms of volume in the alco-beverage segment is around [45-50] percent while PGP’s share is less than 5 percent and Schott does not even have a presence in this segment. In the F&B segment, the combined share of the Parties is around [80-85] percent while that of PGP is around [10-15] percent, household and cosmetics segment is led by PGP, with around [70-75] percent share, and the pharma segment is led by Schott, with [45-50] percent market share.

57. The aforesaid analysis highlights that post the Proposed Transaction, within the overall container glass market, the likelihood of significant changes in concentration levels is particularly high in the sub-segments of alco-beverage and F&B, wherein the combined entity will have large presence. The combined market shares and incremental HHI in the alco-beverage segment are around [45-50] percent and 1000, respectively, and the same in the F&B segment are around [80-85] percent and 2800, respectively, which are highly significant. Accordingly, it can be reasonably concluded that AGI and HNG are the only significant organised players in both the alco-beverage and F&B sub-segments.

Extent of effective competition likely to sustain in a market

58. AGI submitted that the glass segment is highly fragmented and competitive. It also comprises both the organised and unorganised sector and, as such, the existing players will continue to exert significant competitive constraint on the Parties post the Proposed Transaction. In support of the same, it has been stated that the total revenue of PGP is greater than the revenue of AGI and HNG, and that PGP is a global provider of glass packaging solutions and Asia’s largest speciality glass manufacturer. As regards the unorganised sector, it has been stated that the unorganised sector has grown rapidly and is continuing to grow on an annual basis.

59. Based on the analysis in terms of market share estimates, it has been noted above that PGP would be second in the glass container market, with a market share of around [10- 15] percent. The presence in overall packaging is no indicator of constraints in a particular packaging segment. In fact, as per the market estimates, contrary to the submissions of the Parties, PGP’s market shares have remained in a narrow range. Apart from PGP, as per the Parties’ own estimate, five out of seven competitors identified had a market share of less than 5 percent. Thus, these competitors are not expected to individually impose sufficient competitive constraints on the combined entity.

60. Furthermore, even the aforesaid presence of PGP and Schott is not relevant, as the user-segment based analysis has already revealed that PGP’s presence is primarily in the household and cosmetics segment and Schott is present only in the pharma segment. In the segment of alco-bev, the only competitors in the organised segment are Empire and Canpack (with estimated combined share of around 10-15 percent) and Haldyn and Sunrise (both having less than 5 percent). Other than these organised players, [35-40] percent market is ascribed to the unorganised Ferozabad Cluster container glass manufacturing units. AGI has further submitted that their customers such as Pernod Ricard, Diageo India, Radico Khaitan etc., source bottles from Ferozabad Cluster companies.

61. The competitive constraints likely to be posed by the unorganised sector have been examined. The Commission noted certain differences in the unorganised and organised segments, and the same are discussed hereunder:

i. Scale: The indicative size of an unorganised unit in the Ferozabad Cluster has been put by AGI in the range of 100-200 tonnes per day and, as stated, there are about 15-20 units producing glass containers. The scale at which these unorganised players operate is minuscule relative to the presence of the Parties which have a daily capacity of around 1600 tonnes for AGI and more than 2000 tonnes for HNG. The scale presents its own set of advantages/disadvantages, which ultimately constitute the competitive intensity. These unorganised players cannot fulfil the market demand substantially; in other words, expansion is constrained by their own installed limited capacities even if it is assumed that they are otherwise capable of imposing competitive constraints going by the commercial dynamics of the market; ii. R&D efforts and product development translating into demand push or cost savings: The Acquirer has submitted that it does carry out certain R&D activities in the product and process to add value to its customers. As per the details provided, the innovative offerings include internal embossed bottles, anti-bacterial bottles, anti-depression (negative ion) bottles, light weighting of the bottles, etc. There are other projects such as batch optimisation, power generation from waste heat and cullet sorters, which would enable reduction in costs.

Even on the sustainability aspect, players such as AGI are taking up processes to reduce carbon footprint. The Parties have submitted that R&D capabilities and possession of intellectual property rights are not essential and do not play a role in an enterprise remaining competitive or surviving in the relevant market. However, product differentiation does create a competitive advantage from the demand perspective and the differences in cost and size of installed capacity create a differentiation from supply perspective in both the short and long run. The ability to move towards reduction of carbon footprint is also likely to create a competitive advantage in the long run. These competitive advantages point to the significance of R&D capabilities and consequent likely present and growing differences in the abilities of the unorganised and organised sector, illustrative of a lack of present and future competitive constraints; and iii. Supply chain dynamics: Based on the Parties’ submissions, it has emerged that the prices of soda ash and supply conditions of soda ash are a big factor in the container glass industry and even bigger players such as the Parties find it hard to navigate and sustain this issue.

Parties with significant installed capacities use soda ash in bulk and have the option to also import the same. However, smaller and unorganised players are not expected to have such ability to constrain the pricing of soda ash. With the Proposed Transaction, as volumes of production increase for the combined entity, this gap between the combined entity and other sellers, including the unorganised sector, in terms of the ability to source raw materials on economic terms is likely to widen further. The Acquirer has submitted that the supply-demand situation in India is improving as required capacity additions are occurring in the soda ash industry, and therefore, from an input perspective, there will be no foreclosure in the relevant market post the Proposed Transaction. However, what is relevant is not the foreclosure in absolute terms but the differences in access to raw materials and the pricing of the same.

62. Based on the aforesaid, the Parties appear to have an advantage in this area going forward. However, considering the submissions of AGI relating to unorganized customers catering to the customers of AGI and HNG, it also appears that the unorganized sector and smaller organized players are in a position to impose limited competitive constraints on the Parties.

Countervailing buyer power

63. AGI submitted that the customers in the glass segment are large conglomerates with deep pockets, and therefore, there is no question of the Parties being able to act independently of competitive forces post the Proposed Transaction. As submitted, the customers are repeat customers and have significant influence over the type of packaging they use. It has also been stated that these companies have significant ability to supply their own containers or to sponsor an entry and/or impose other constraints in situation of possible anti-competitive practices in the glass container manufacturing marketplace. Further, it has been stated that customers of the liquid packaging industry routinely spend billions on advertising in order to shape consumer preferences for particular types of containers and such new campaigns encouraging consumers to switch from glass to other materials as well as targeted price reductions could significantly affect the demand for glass packaging post the Proposed Transaction.

64. Further, the Acquirer submitted that the customers in this sub-segment multi-source from various suppliers, and multi-sourcing is essential in this industry for customers to ensure security of supply considerations and obtain better commercial terms. As submitted, the design rights over the containers are owned by the customers and moulds are prepared accordingly. The moulds are generally provided by customers to the glass manufacturers and the intellectual property right is owned by the customers. Therefore, as far as the quality of the bottle meets customer standards, customers are comfortable buying from either of the producers as there is not much difference in product quality, price and service to the customers.

65. Also, it has been stated that any pricing power and consequent loss of sales is against the plant economics. As stated, as per standard industrial practice, glass furnaces must run continuously for 24 hours a day, and they cannot be turned off or easily idled, and when shut down, they may take months to restart, and therefore, there is a need for the supply chain to be fully functioning and operational to ensure efficiency.

66. While there is no doubt that the customers of the Parties are large conglomerates and there is also an element of dependence of suppliers of container glass manufacturers on these customers, countervailing buyer power is considered more a function of relative differences in concentration on the demand and supply side rather than just the size of customers, unless vertical integration trends are clearly discernible. The glass market, as noted above, is already concentrated and would become significantly more concentrated with the Proposed Transaction. Thus, while switching may seem plausible in theory, it may be difficult in practice for lack of viable options which can cater to the volume, choice and quality requirements of large buyers. The Acquirer has stated the possibility of backward integration and given a few examples, such as Mohan Meakins and Kals Distilleries and attempted entry of Carlsberg (with participation in CIRP of HNG). The two companies have less than 5 percent capacity and, thus, the same does not appear to indicate any industry-wide trend or practice. As regards the shift to alternative materials and shaping preferences through advertisements, the differences between materials have already been discussed and for the same reasons based on which various packaging materials do not belong in the same relevant market, this stated possibility of shifting is not likely to confer any buyer power.

67. The multi-sourcing option and countervailing buyer power may be more applicable in case of bottles where moulds are owned by the user companies, and to some extent, for general bottles sold through the trade route in addition to direct sales. However, even in that case, the actual substitutability would be limited to the extent of capacity of the other players. If the other players are either constrained in terms of capacity in absolute terms or due to other commercial factors, the threat of multi-sourcing may not translate into pricing power.

68. Overall, the countervailing buyer power appears at best to be limited. Further, even if there is a higher degree of buyer power at present, the impact on the same given the Proposed Transaction needs to be considered. As noted, AGI and HNG are the top two organised players in container glass and in the two segments of alco-beverage and F&B, which implies the elimination of the most credible option to switch as far as users are concerned.

Competition from imports

69. The Acquirer submitted that the extent of competition exerted by import in the glass packaging segment is more intense. The share of imports of glass packaging material in the overall import of liquid packaging increased from 13.6 percent in FY 2018 to 18.3 percent in FY 2021 in value terms. Similarly, in volume terms, the share of import of glass materials increased from 36.9 percent in FY 2018 to 44.4 percent in FY 2021.

It is important to note, that with the stated percentage growth, the imports of glass containers still constitute only a minuscule percentage of glass consumption. As per the Parties’ submissions, imports catered to only 3 percent of the overall demand for container glass in 2020-21.

70. As regards the effective constraints from imports beyond the quantitative estimates of imports, AGI has submitted that the industry leaders like Diageo (Alcoholic Beverage), Abbott Laboratories (Pharmaceuticals) and HUL (Personal Care) directly import glass packaging materials in India. While imports do not appear to be a significant factor in terms of present market dynamics, but the likelihood of increase in imports following any exercise of pricing power by the combined entity cannot be completely ruled out.

Expansion of existing competitors

71. The Acquirer submitted that customers have numerous options with expanded capacities to shift their demand to. Of the illustrations given by the Acquirer, only one expansion relates to glass containers for alco-bev and F&Bs, i.e., by Sunrise. All other expansions cited relate to other user segments. The increase in capacity of Sunrise by 240 TPD is insignificant to cause any change in position of the combined entity. The same aspect considered holistically in the background of the overall analysis is not prima facie a factor which can mitigate competition concerns.

72. The Acquirer, in Response to SCN, submitted that concentration levels do not conclusively determine the level of competition in the market. To this effect, the Acquirer made certain broad points which are discussed hereunder.

73. The Acquirer stated that the Commission has failed to analyse the market power of other players such as PGP Glass as well as the presence of large customers which can exercise significant countervailing buyer power. As regards competitive constraints from PGP Glass, the Acquirer submitted that based on the total revenue, PGP Glass has the highest market share and it has the resources and the significant technological competence and advantage to expand its capacities or even divert its exports to the domestic market in case AGI Greenpac attempts to increase prices beyond the competitive levels post the Proposed Transaction.

74. The Commission has already examined the presence of PGP in the container glass market and in segments of container glass. The Commission has already noted that PGP is a significant player in the household segment and its presence in that segment does not pose any direct significant competitive constraints in the container glass market. As regards the likelihood of entry/expansion by PGP pursuant to any attempted price increase by the combined entity, it may be noted that entry in order to be a deterrent for any anti-competitive conduct needs to first be likely, and then timely and sufficient. In this regard, past entry/expansion is understood as a truer representative of actual entry/expansion conditions as those reflect not only the visible but also the invisible barriers which may characterise the industry. The Acquirer has itself submitted in a different context that consolidation has been a feature of the glass container industry over the years and has also illustrated the acquisitions made by HNG over the years. The Commission has also noted that the market shares of various players in the market for container glass and its segments over the last 3 years has largely moved in a narrow range and market structure has remained more or less the same. On the basis of the same, the Commission does not consider it appropriate to impute any more constraints from PGP or any other player on the basis of their presence in other related or unrelated segments.

75. The Acquirer further submitted that higher concentration levels do not translate into pricing power in this industry. To this effect, the Acquirer referred to certain statements made by AGI management earlier regarding glass facing competition from alternative packaging materials and the aspect of regulated pricing in the liquor industry. The Acquirer also referred to the findings of PWC in its financial and tax due diligence report in respect of HNG, wherein it is stated that HNG has not been able to increase its selling rates to the tune of increase in direct costs leading to shrinking gross margins and that there is a time lag in passing on the input cost increase to the customers and that, on account of the fragmented nature of the container glass industry, the price increase is not frequent or substantial enough in this industry. The inability of HNG to pass on increase in direct costs appears more of a firm-specific factor given the situation of HNG and has accordingly been dealt with separately. The aspect of countervailing buyer power has already been examined in detail, and these submissions do not appear to be reason enough to change the same.

76. The Acquirer submitted that the Commission’s observation that the combined entity will have an overwhelming presence in the alco-beverage and the F&B segments post the Proposed Transaction is erroneous and based on a flawed application of supply-side substitutability. The Commission has already examined the aspect of supply-side substitutability in detail and observed that the same is limited considering, inter alia, the techno-commercial aspects mentioned in the Bucher Emart letter submitted by the Parties.

Competition assessment – Sale of container glass to/through traders

77. In this regard, as submitted, in recent times, several cottage/small-scale industries have developed, which have the requirement of packaging material for pickles, juices, milk, food processing, etc., in small quantities. To meet such small-sized supplies, it is not possible for such customers to directly approach glass manufacturers. As with any other trade and business dynamics, there is a bridge in the form of traders between the glass manufacturers and the consumer cottage industry.

78. The Parties provided details of their presence in this segment. The Parties on their part submitted that the sale of general bottles to/through traders constitutes a minuscule portion of the total sales made by AGI and HNG and the customers to whom such general bottles are sold are price-sensitive customers who typically purchase small quantities of standard glass bottles/containers through traders. Accordingly, as stated, in case of any attempt on the part of AGI to increase prices beyond competitive levels, the customers would most likely buy products from other players, thereby disciplining such price increase. The Commission observed that while such sales may be constituting minuscule percentage of total sales of AGI/HNG, the Parties are estimated to have substantial presence in the segment, which is more relevant. At the same time, the submissions of switching, etc., appear to be devoid of merit, considering the Parties’ significant position in the overall container glass segment in general and alco-beverage and F&B sub-segments in particular.

Vertical/Complementary overlaps

79. As submitted, AGI has an insignificant presence in the segment of security caps and closures (with market share being less than 2 percent while HNG does not have any presence. The market is characterised by the presence of other significant competitors, viz., Oricon Enterprises Limited (12%), Guala Closures Group (12%), Weener Empire Plastics Limited (6%), etc.

80. In terms of installed capacity, as per estimates given by the Parties, the market size for the manufacture and supply of security caps and closures was approx. 32.9 billion units in FY 2021-22 and the installed capacity of AGI is 912 million units, which also implies an insignificant presence.

81. Based on the above, the Commission is of the view that the Proposed Transaction is not likely to confer any ability or incentive to the Parties to change the competition dynamics in any segment riding on the vertical/complementary linkage resulting therefrom.

82. Thus, based on the above analysis, the Proposed Transaction is likely to result in appreciable adverse effect on competition in the overall container glass packaging in general and in the sub-segments of alco-beverage and F&B in particular and in the segment of sale of container glass bottles to/through traders. However, there are certain peculiar factors in the context of presence of Target which also need to be considered. The Acquirer submitted that the Target is a failing firm and is presently undergoing CIRP. The submissions of the Acquirer in this regard are examined hereunder.

Failing firm defence

83. The Acquirer has made the following submissions on the aspect of HNG being a failing firm: i. Inefficient state of operations: As submitted, the operations of the Target have run inefficiently in terms of capital deployment, lack of maintenance of assets and poor operational efficiencies. The Target had done extensive capital expenditure which was beyond its requirements, and had not been operating many of its furnaces over the last several years, leading to under-utilisation of the resources deployed. Many of the furnaces have not been rebuilt for more than 10 years, which led to inefficient operations and higher cost, resulting in lower margins and losses; ii. Acquisition is in the best interest of every stakeholder including the customers (industrial), end consumers and the existing financial and operational creditors of the Target as well as the workmen and employees of the Target: As submitted, this acquisition will yield several economic and financial benefits, such as enhancing product output volumes, sustaining employment levels, debt repayment, and overall restructuring of the business; iii. Safeguard against the assets exiting the market: It is submitted that, because of financial distress, if the Target’s business would be liquidated, it would reduce effective competition in the glass segment and significantly affect customers/consumers. As such, the acquisition of the Target by AGI, which is experienced and technically capable to handle the business operations of the Target and has definitive plans to revive and turn-around the Target’s business, would be pro-competitive and would ensure that the market remains competitive in times to come. Further, as submitted, the Proposed Transaction is efficiency enhancing as AGI will rebuild more efficient furnaces and improve the efficiency of the Target’s machines for higher output. Conversely, it is submitted that competition in the glass segment is likely to deteriorate to an equal extent if the Target is not acquired and allowed to ‘fail’ or exit the market.

84. In this regard, the Commission considered the financial and tax due diligence report of HNG, which notes that HNG has not been able to increase its selling prices to the tune of increase in direct costs leading to shrinking gross margins. The report further notes that as per the management of HNG, there is a time lag in passing on the input cost increase to the customers and HNG also increased its selling prices during Q1 FY 2023. The management of HNG further provided that, given the fragmented nature of the container glass industry, the price increases are not frequent or substantial enough.

85. The Acquirer further submitted a detailed operational status of various plants of HNG. As per the submissions, a majority of HNG’s furnaces that are running had been rebuilt 10 years ago or earlier. As submitted, the typical life of a container glass furnace is 10 years, and as the furnace gets older, the specific energy consumption increases prominently, from a typical annual rate of 2.5 percent to 5-6 percent towards the end of its prescribed life, which not only makes the operations non-competitive but is also detrimental to the environment. Further, as submitted, with an ageing furnace, the achievable draw from the furnace vis a vis installed capacity also reduces, which also makes the production costlier, as the fixed costs are spread over lower volume.

86. Based on the above, the Acquirer submitted that delay in acquisition would adversely affect the viability of Target. In this regard, in addition to the increased operational costs impacting the competitiveness, the Acquirer submitted that, since the furnaces are not operating properly because of leakages, emergency repairs and other firefighting production issues, the output from HNG’s furnaces is inconsistent, which leads to non-performance of their contracts with their customers. It was stated that this creates a vicious circle which will further lead to reduced economic activity.

87. The Commission considered the submissions of the Acquirer on the status of HNG’s operational aspects and the supporting information on record in the form of status of furnaces as installed and as currently operative and the financial parameters highlighted in the due diligence report and also discernible from the financial statements of HNG. As a part of its Statement of Audited Financial Results for the Quarter Ending 31 March 2021, it has been duly mentioned that the company (HNG) is incurring losses since FY2013, which has eroded its net worth completely. In fact, the auditors of HNG, based on their audit of financial statements for FY 2021-22, have opined that HNG does not appear to be a going concern. Considering the aforesaid, the Commission is of the view that time is indeed of the essence in the context of the Proposed Transaction. The Commission, leaving the question of HNG being a ‘failing firm’ open, observed that a holistic approach to the assessment of the Proposed Transaction would require balancing the structural changes in concentration, etc., resulting from the Proposed Transaction and the ground position of operational affairs of HNG.

88. The Commission noted that the Acquirer, on a without-prejudice basis, as a part of Response to SCN has proposed Modification to address the concerns raised in the SCN in terms of Regulation 25(1A) of the Combination Regulations, which reads, “(1A) Along with their response to the notice issued under sub-section (1) of section 29 of the Act, the parties to the combination may offer modification to address the prima facie concerns in the said notice and on that basis, the Commission may approve the proposed combination under sub-section (1) of section 31 of the Act: Provided that in such a case, the additional time, not exceeding fifteen days, needed for evaluation of the modification offered, shall be excluded from the period provided in sub-section (2A) of section 6 of the Act, sub-section (2) of section 29 of the Act and subsection (11) of section 31 of the Act." The Commission considered the same against the backdrop of the operational affairs of HNG.

Analysis of Modification proposed by AGI

89. AGI offered the divestiture of the Rishikesh plant of HNG to alleviate the prima facie concerns identified by the Commission in the SCN. The Rishikesh plant is set up on an area of 11.3 acres having two glass melting furnaces and a production capacity of 400 TPD (1,46,000 MTPA).

90. As submitted, out of all the plants of HNG, the Rishikesh plant is the least loss-making. It saw a growth of 24 percent in net revenue in FY 2021-22. The Rishikesh plant also witnessed one of highest growth by volume in FY 2021-22, i.e., around 17 percent.

The Rishikesh plant has substantial and sizeable operations and witnessed growth in revenue over the years. The revenue from the Rishikesh plant increased from INR 233.1 crore in FY 2021 to INR 290 crore in FY 2022.

91. As per the details submitted, Rishikesh plant had the highest utilisation by percentage as compared to other plants. The percentage utilization of the Rishikesh plant was 94.1 percent in FY 2021 and 91.1 percent in FY 2022. Further, as submitted, the furnace of the Rishikesh plant had undergone cold repair in 2016 and can be maintained up to 2028. As submitted, out of all the plants of HNG, the Rishikesh plant is operating to 100 percent of the installed capacity, [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxx]. Further, the Rishikesh plant has [xxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxx] equivalent to other higher capacity plants of HNG. As submitted, the availability of the forming lines and printing lines will provide the purchaser with higher flexibility to run the plant in an efficient and profitable manner.

92. The Rishikesh plant comprises two glass melting furnaces, which will provide the purchaser the flexibility to manufacture different coloured, i.e., flint/amber/green, glass at the same time compared to acquisition of a plant with just one glass melting furnace. The plant is used for the production of glass containers catering to the alco-beverage, F&B as well as pharmaceutical and wellness industries.

93. Based on due diligence conducted by PWC, it is submitted that HNG operated through seven plants in India with an installed capacity of 4300 TPD. However, the operational capacity has reduced to 2325 TPD on account of furnaces at the Neemrana, Rishra, Bahadurgah and Sinnar plants, which have not been operating.

94. The Acquirer also provided an assessment of operational dynamics of each HNG plant in detail. As submitted: i. The Bahadurgarh plant of HNG has three furnaces, out of which one is non-operational. The operating capacity (after reduction of non-operational furnaces and down capacity) is 490 TPD. [xxxxxxxxxxxxxxxxxxxxxxxx xxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxx]; ii. The Puducherry plant of HNG has one furnace with a production capacity of 330 TPD, and the furnace is currently non-operational on account of leakage. The operating capacity (after reduction of down capacity) is 270 TPD. [xxxxxxx xxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxx xxxxxxxx xxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxx]; iii. The Sinnar plant of HNG has two furnaces, out of which only one furnace is currently operational. The operational furnace has a production capacity of 650 TPD. The operating capacity (after reduction of non-operational furnace and down capacity) is 420 TPD. Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx;] iv. The Neemrana plant of HNG has one furnace, with a production capacity of 260 TPD. However, the furnace has been non-operational since the last 7 years; v. The Naidupeta plant of HNG has one furnace with a production capacity of 650 TPD. The operating capacity (after reduction of non-operational furnaces and down capacity) is 530 TPD. Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] vi. The Rishra plant of HNG has three furnaces out of which two are non-operational. The production capacity of the one operational furnace in this plant is 290 TPD.

95. The divestiture as a modification needs to be examined, firstly, in terms of adequacy to address the adverse impacts of structural changes in the market resulting from the combination, and secondly, on the suitability of the specific assets required to be divested. As stated above, the proposal is assessed against the backdrop of financial issues and resulting operational issues, potential risks of additional impairment of assets and consequent impact on market dynamics.

96. As regards the assessment of adequacy of divestiture, the Commission noted that, as the market is already concentrated and HNG is the market leader, the combined shares would obviously be on a higher side, and therefore, the appropriate yardstick to assess the specific impact of the Proposed Transaction would be the impact of modification on the incremental change in the presence of the combined entity. To this effect, the Commission observed that as submitted by AGI, the production capacity of the Rishikesh plant is 400 TPD, which constitutes approximately 17 percent of HNG’s total utilised capacity and accounts for 25 percent of incremental capacity, considering that AGI’s capacity installed is 1600 TPD.

97. Considering that the analysis had revealed that the combined entity may have substantial presence in both the alco-beverage and F&B segments, it is imperative that the divested assets have presence in both these segments. As submitted by AGI, Rishikesh plant is present in all four segments of container glass market. The divestiture would lead to the elimination of around 28 percent and 15 percent of the increment in alco-beverage and F&B segments, respectively. In this regard, the Commission further observed that the alco-beverage segment constituted approximately [xx] percent of the sales by volume of the total glass container industry in FY 2021-22 while the F&B segment constituted a modest x] percent of the total sales by volume in the glass container industry. The Commission is of the opinion that the split of container glass market in terms of the industrial segments is also relevant in assessing the Modification.

98. Considering that the Rishikesh plant is engaged in the manufacture and sale of container glass in all segments, and further considering the fact of two furnaces and corresponding complementary assets and other submissions relating to the operational aspects of Rishikesh plant as noted above, the assets proposed to be divested appear to be self-contained and divestiture appears to incentivise a new entry or augmenting of capacity by an existing competitor of the Parties. The new entrant or an existing competitor would gain an overall presence of around 5 percent market in container glass while gaining presence in all four segments of container glass.

99. The voluntary modification proposed by the Acquirer has been considered and accepted by the Commission while undertaking a holistic assessment of the transaction. All things considered, including the presence of limited competitive constraints from other competitors, imports, buyer power, the operational conditional of other plants and the financial and operational situation of HNG; together with the proposed modification has led the Commission to the conclusion that the transaction is not likely to have an AAEC.

100. Considering the material on record, details provided in the Notice, Response to SCN and factors provided under sub-section (4) of Section 20 of the Act and the modifications proposed by the Acquirer, the prima facie concerns of a likely AAEC as laid down in the SCN have been addressed by the Acquirer and the Commission, thus, decided not to proceed further with the investigation.

101. The Commission hereby approves the proposed combination under sub-section (1) of Section 31 of the Act, subject to compliance of Modification offered by AGI under Regulation 25(1A) of the Combination Regulations as a part of Response to SCN.

102. The Annexure and Schedules annexed to the order shall form an integral part of the order.

103. In carrying out the Modification, the Parties shall comply with the provisions of the Act, the Combination Regulations and the Competition Commission of India (General Regulations), 2009.

104. In case the Acquirer fails to comply with the Modification as provided in the Annexure, the Proposed Transaction would be deemed to have caused appreciable adverse effect on competition in India and the Acquirer shall render itself liable for being proceeded under the relevant provisions of the Act.

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

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

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

Annexure Modification

1. All capitalised terms used in the Modification to the Proposed Transaction shall have the meaning provided in Appendix A annexed herewith if the same are not defined in the body of the Modification to the Proposed Combination.

THE COMMITMENT TO COMPLETE THE DIVESTMENT

2. AGI Greenpac or its wholly owned subsidiary (as the case maybe) commits to divest, or procure the divestiture of the Divestment Business, i.e., HNG’s plant located at Rishikesh (“Divestment Business”) by the end of the First Divestiture Period as a going concern to a purchaser approved by the Commission (“Approved Purchaser”) on terms of sale as approved by the Commission in accordance with the procedure described in this Modification.

3. To carry out the divestiture as envisaged in this Modification, AGI Greenpac shall commit to enter into a binding Sale and Purchase Agreement to sell the Divestment Business (“Agreement”), within the First Divestiture Period. If AGI Greenpac has not completed the sale of the Divestment Business at the end of the First Divestiture Period, AGI Greenpac shall grant the Divestiture Agency the mandate to sell the Divestment Business in accordance with the procedure described in the Second Divestiture Period.

NO ACQUISITION OF INFLUENCE

4. AGI Greenpac shall, for a period of ten (10) years from date of sale of the Divestment Business, not acquire direct or indirect influence over the whole or part of the Divestment Business. AGI Greenpac shall provide the Commission with an undertaking in respect of compliance of condition relating to non-acquisition of influence. The undertaking shall be submitted on a yearly basis within ten days after the end of every year (commencing from the Closing Date)

FIRST DIVESTITURE PERIOD

5. As mentioned above, AGI Greenpac shall commit to divest the Divestment Business within [xxxxxxxxxxxxxxxx] from the ‘Effective Date’ as defined in the Resolution Plan of AGI Greenpac (or such extended period as may be agreed by the Commission) which will constitute the First Divestiture Period (“First Divestiture Period”).

6. AGI Greenpac shall submit the draft Agreement for the approval of the Commission within a period of [xxxxxxxxxxx] of the commencement of the First Divestiture Period and shall complete the transfer of the Divestment Business to the Approved Purchaser within the First Divestiture Period.

SECOND DIVESTITURE PERIOD

7. In the event that the sale of the Divestment Business does not close, i.e., transfer of the Divestment Business to the Approved Purchaser by the end of the First Divestiture Period (or such extended period as may be agreed by the Commission) (“Closing Date”) then the Second Divestiture Period shall commence and will last for a period of up to [xxxxxxxxxxxx] (or such extended period as may be agreed by the Commission) for carrying out the proposed divestment through the Divestiture Agency.

APPROVED PURCHASER CONDITIONS

8. The purchaser proposed by AGI Greenpac for acquiring the Divestment Business, shall – (i) be independent of and with no connection whatsoever with AGI Greenpac and its affiliates; (ii) not be either a past or present employee or director (or spouse or child of such employee or director); (iii) not have any structural or financial links (this does not include any commercial dealings in the ordinary course of business, which may have taken / take place on an arm’s length basis), whether directly or indirectly, with any existing AGI Greenpac group entity; (iv) has the financial resources, expertise and incentive to operate the Divestment Business in the relevant market; (v) neither be likely to create any prima facie competition concerns, nor give rise to a risk that the implementation of the Order of the Commission approving the Proposed Transaction (“Order”) will be delayed, and must, in particular, reasonably be expected to obtain all necessary approvals from the relevant regulatory authorities (if any) for the acquisition and operation of the Divestment Business. The conditions enlisted in paragraph 8 (i) to (v), above are collectively referred to as Purchaser Requirements.

COMMISSION’s PRIOR APPROVAL OF THE AGREEMENTS BETWEEN AGI GREENPAC AND APPROVED PURCHASER

9. The final binding Agreement relating to the sale of the Divestment Business shall be conditional on the Commission’s approval.

10. Within a period of [xxxxxxxxxxxx] from the execution of the Agreement with the Approved Purchaser, AGI Greenpac shall submit a copy of the final agreement(s) to the Commission. AGI Greenpac will further demonstrate to the Commission that divestment is consistent with the Commission’s Order.

STRUCTURE OF THE DIVESTMENT BUSINESS

11. The Divestment Business shall include: i. All tangible and intangible assets specifically related to and/or being used in connection with the Divestment Business on the Effective Date; ii. All necessary licenses, permits and authorizations issued by any Governmental or statutory authority related to and/or being used in connection with the Divestment Business; iii. All contracts, leases, commitments, obligations, and understandings of and related to the Divestment Business; iv. All customer records, credit records and other records pertaining to the Divestment Business; v. All rights in and to inventories of products, raw materials, supplies and parts, including work-in-process and finished goods held and used by HNG at the Rishikesh plant;

The elements provided in sub-paragraphs (i) to (v) are collectively referred to as “Assets”.

12. If there is any asset or personnel which is not covered above but which are both used (exclusively or not) in the Divestment Business and are necessary for the continued viability and competitiveness of the Divestment Business, that asset, personnel, or an adequate substitute will be offered to the Approved Purchaser.

13. In addition, the Divestment Business shall include such transitional support as may be agreed between the Approved Purchaser and AGI Greenpac which is necessary to enable the Approved Purchaser to conduct the Divestment Business in at least the same manner as HNG operated the Divestment Business on the Effective Date. It is clarified that the Approved Purchaser will only be entitled to use the trademark and logo of HNG for a period of [xxxxxxxxxxx] from the date of completion of the transfer of the Divestment Business in order to dispose of the existing inventory at the Rishikesh plant on the date of transfer.

HOLD-SEPARATE OBLIGATIONS

14. AGI Greenpac shall, from the Effective Date until the transfer of the Divestment Business to the Approved Purchaser, procure that the Divestment Business is kept separate from the business that AGI Greenpac will be retaining and to ensure that: (i) management and staff of the business retained by AGI Greenpac have no involvement in the Divestment Business; and (ii) the Personnel have no involvement in any business retained by AGI Greenpac and do not report to any individual outside the Divestment Business.

15. Until Closing, AGI Greenpac shall assist the Monitoring Agency in ensuring that the Divestment Business is managed as a distinct and separate saleable business from the business retained by AGI Greenpac. Within thirty days from the Effective Date, AGI Greenpac shall appoint a Hold Separate Manager for the Divestment Business, who shall manage the Divestment Business independently and in the best interest of the business with a view to ensure its continued economic viability, marketability and competitiveness and its independence from the businesses retained by AGI Greenpac. The Hold Separate Manager shall closely cooperate with and report exclusively to the Monitoring Agency and, if applicable, the Divestiture Agency. Any replacement of the Hold Separate Manager shall be subject to the approval of the Commission.

16. The purpose of the hold separate obligations is to: (a) preserve the Divestment Business as a viable, competitive and on-going business, independent of AGI Greenpac until the transfer of the Divestment Business to the Approved Purchaser; (ii) assure that no Confidential Information is exchanged between AGI Greenpac and the Divestment Business, except as otherwise provided herein; and (iii) prevent interim harm to competition in the relevant market pending the Divestiture.

RING-FENCING

17. AGI Greenpac shall ensure that Confidential Information obtained by AGI Greenpac is eliminated and is not used by AGI Greenpac. For this purpose, AGI Greenpac shall implement, or procure implementation of necessary and adequate measures. AGI Greenpac shall also ensure that the participation of the Divestment Business in the central information technology network will be discontinued to the extent possible, provided however, such discontinuation should not affect the viability and competitiveness of Divestment Business. The employees of AGI Greenpac who provide support to the Divestment Business shall retain and maintain Confidential Information as confidential and except as permitted under the Order, shall not provide, discuss, exchange, circulate, or otherwise furnish any such information to or with any person whose employment involves the business retained by AGI Greenpac. Such employees shall also execute agreement(s) prohibiting disclosure of Confidential Information.

18. AGI Greenpac may obtain or keep information relating to the Divestment Business which is reasonably necessary for the Divestiture or the disclosure of which to AGI Greenpac is required by law or which is reasonably required by AGI Greenpac to comply with their financial reporting or other legal obligations (including in relation to tax filings).

TRANSITIONAL SUPPORT

19. AGI Greenpac shall provide such reasonable transitional support as may be required by the Approved Purchaser to effectively implement the sale of the Divestment Business. AGI Greenpac will provide all such transitional support as required by the Approved Purchaser and deemed necessary by the Commission on the recommendation of the Monitoring Agency or the Divestiture Agency, as the case may be.

PRESERVATION OF ECONOMIC VIABILITY, MARKETABILITY AND COMPETITIVENESS

20. From the Effective Date and until the competition of the sale of the Divestment Business to the Approved Purchaser, AGI Greenpac shall take such steps as are necessary to maintain the economic viability, marketability and competitiveness of the Divestment Business and minimize the loss of competitive potential of the Divestment Business and shall prevent the destruction, removal, wasting, deterioration, sale, disposition, transfer (including creation of encumbrance) or impairment of the assets related to the Divestment Business available on the Effective Date, except as would occur in the ordinary course of business.

21. From the Effective Date and until the completion of the sale of the Divestment Business to the Approved Purchaser, AGI Greenpac shall maintain the operations including assets of the Divestment Business at least as they are operated on the Effective Date (including efforts to generate new business).

22. AGI Greenpac shall use its best efforts to preserve the existing relationships of HNG with its suppliers, vendors, customers, agencies, and other third parties having business related to the Divestment Business as on the Effective Date.

23. Further, AGI Greenpac shall perform or procure the performance of (i) all maintenance to, and replacements of, the assets of the Divestment Business in the ordinary course of business, in accordance with past practice, and the business, capital, and strategic plans in place on the Effective Date; and (ii) carry on such capital projects, physical plant improvements, and business plans as are already under way or planned, including, but not limited to, existing or planned renovation and expansion projects, in accordance with the business, capital, and strategic plans in place on the Effective Date.

24. [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxx]

NON – SOLICITATION

25. AGI Greenpac shall not, and procure that its Affiliates do not employ, or make offers of employment to, any member of Key Personnel, transferred with the Divestment Business for a period of five (5) years after the Closing Date (as applicable), unless the employment of such member of Key Personnel has been terminated by the Approved Purchaser(s).

DUE DILIGENCE

26. In order to enable potential purchasers to carry out a reasonable due diligence of the Divestment Business, AGI Greenpac shall, subject to customary confidentiality assurances and dependent on the stage of the Divestiture process as well as the data available to AGI Greenpac on the Effective Date, provide to potential purchasers sufficient information: (i) as regards the Divestment Business; and/or (ii) relating to the Personnel and allow them reasonable access to the Personnel.

REPORTING

27. AGI Greenpac shall submit written reports on the Divestiture process to the Monitoring Agency no later than seven (7) days after the end of every month following the Effective Date, including the status of the Divestiture. AGI Greenpac shall submit a list of all potential purchasers which have expressed interest in acquiring the Divestment Business to the Monitoring Agency at each stage of the Divestiture process, as well as a copy of all offers made by such potential purchasers within seven days of their receipt.

28. AGI Greenpac shall keep the Monitoring Agency informed about the Divestiture process, in particular, on preparation of the data room documentation and the due diligence procedure and shall submit copies of any information memorandum and/or similar documents to the Monitoring Agency.

MONITORING AGENCY

29. The Commission shall, under Regulation 27 of the Combination Regulations, appoint an independent agency as Monitoring Agency for the purpose of, inter alia, supervision of the divestment of the Divestment Business.

30. The Monitoring Agency shall undertake such functions as may be directed by the Commission, which shall include, inter alia, the following functions:

i. Overseeing the on-going management of the Divestment Business from the Effective Date with a view to ensuring its continued economic viability, marketability and competitiveness and monitoring compliance by AGI Greenpac with the modifications to the combination provided in the Order. To that end, the Monitoring Agency shall:

a. monitor the preservation of the economic viability, marketability and competitiveness of the Divestment Business, and the holding separate of the Divestment Business from the business retained by AGI Greenpac. b. supervise the management of the Divestment Business as distinct and saleable business. c. with respect to Confidential Information: • determine all necessary measures are being taken to ensure that AGI Greenpac does not after the Effective Date obtain any Confidential Information relating to the Divestment Business; • strive to ensure that any Confidential Information relating to the Divestment Business obtained by AGI Greenpac after the Effective Date is eliminated and will not be used by AGI Greenpac; • decide whether such information may be disclosed to or kept by AGI Greenpac as the disclosure is reasonably necessary to allow AGI Greenpac to carry out the Divestiture or as the disclosure is required by law; d. propose to AGI Greenpac such measures as the Monitoring Agency considers necessary to ensure AGI Greenpac’s compliance with the Order, in particular the maintenance of the economic viability, marketability or competitiveness of the Divestment Business, the holding separate of the Divestment Business and the non-disclosure of Confidential Information, including but not limited to commercially sensitive information; e. review and assess potential purchasers as well as the progress of the Divestiture process and verify that at each stage of the Divestiture process, potential purchasers receive sufficient information relating to the Divestment Business in particular by reviewing the relevant data room documentation, information memorandum and due diligence process and that the potential purchasers are granted reasonable access to the Personnel;

f. act as a contact point for any requests by Third Parties, in particular potential purchasers, in relation to the Order; submit to the Commission a written report within ten (10) days after the end of every month which shall cover (a) the operation and management of the Divestment Business; and (b) the progress of the Divestiture process as well as potential purchasers. A non-confidential copy of the said report will be provided to AGI Greenpac; g. The Monitoring Agency shall report immediately in writing to the Commission of any failure on part of AGI Greenpac to comply with the Order; h. submit to the Commission a written report containing its recommendations as regards (a) the suitability of the purchaser proposed by AGI Greenpac; (b) whether the Divestiture is being carried in accordance with the Order; and (c) where applicable, its recommendations with regard to Divestiture of the Divestment Business without one or more Assets as mentioned above, taking into account the requirements of the proposed purchaser; i. assume the other functions assigned to the Monitoring Agency under the Monitoring Agency Agreement.

31. A copy of the Monitoring Agency Agreement shall be provided to AGI Greenpac and AGI Greenpac shall use its best efforts to facilitate the Monitoring Agency in performance of its duties and obligations provided in the Monitoring Agency Agreement. Any failure by AGI Greenpac in such facilitation may be deemed to be a contravention of the Order.

DIVESTITURE AGENCY

32. AGI Greenpac shall divest or seek to complete the sale of the Divestment Business within the First Divestiture Period. However, if the divestiture does not take place within the First Divestiture Period or the period as may be extended by the Commission, the Commission may, under Regulation 27 of the Combination Regulations, appoint an independent agency as the Divestiture Agency (“Divestiture Agency”) for the purpose of supervising the sale of the Divestment Business during the Second Divestiture Period.

33. The appointment of the Divestiture Agency shall take effect from the commencement of the Second Divestiture Period or the day of its appointment, whichever is later.

34. Upon receipt of the notice of the Commission regarding the appointment of the Divestiture Agency, AGI Greenpac must execute, within the period prescribed by the Commission, a comprehensive power of attorney in favor of the Divestiture Agency to effect the sale of Divestment Business and all actions and declarations which the Divestiture Agency considers necessary or appropriate to achieve the sale of Divestment Business. including the power to appoint advisors to assist with the sale process. The power of attorney shall include the authority to grant sub-powers.

35. During the Second Divestiture Period, the Divestiture Agency shall have the sole authority to complete the sale of the Divestment Business at no minimum price. Upon request of the Divestiture Agency, AGI Greenpac shall cause the documents required for effecting the sale of the Divestment Business, to be executed.

36. The sale of the Divestment Business shall not be affected by the Divestiture Agency unless and until the Commission has approved the terms of the Sale and Purchase Agreement, including any ancillary agreements, and the purchaser proposed by the Divestiture Agency (as detailed above).

37. A copy of the Divestiture Agency Agreement shall be provided to AGI Greenpac and AGI Greenpac shall use its best efforts to support the Divestiture Agency in the performance of its duties and obligations provided in the Divestiture Agency Agreement.

SALE DURING THE SECOND DIVESTITURE PERIOD

38. Within the Second Divestiture Period, the Divestiture Agency shall complete the sale of the Divestment Business through a transparent sale process at no minimum price.

39. The Divestiture Agency shall have full discretion as to the manner in which it sells the Divestment Business. The Divestiture Agency shall include in the Sale and Purchase Agreement (as well as in any ancillary agreements) – (i) such terms and conditions as it considers appropriate for an expedient disposal in the Second Divestiture Period; and, (ii) such customary representations and warranties and indemnities as are reasonably required to effect the sale. The Divestiture Agency shall protect the legitimate interests of AGI Greenpac, including commercial interests, subject to AGI Greenpac’s unconditional obligation to divest at no minimum price in the Second Divestiture Period.

40. During the Second Divestiture Period, the Divestiture Agency shall provide the Commission with a comprehensive monthly (or otherwise at the Commission’s request) report on the progress of the divestiture process. The monthly reports shall be submitted within seven (7) days after the end of every month and a non-confidential copy to AGI Greenpac.

DUTIES AND OBLIGATIONS OF AGI GREENPAC

41. AGI Greenpac shall provide and shall cause its advisors to provide the Monitoring Agency and Divestiture Agency with such co-operation, assistance and information as the Monitoring Agency and/or Divestiture Agency may reasonably require to perform its tasks. The Monitoring Agency and Divestiture Agency shall have full and complete access to any of the Divestment Business’ books, records, documents, management or other personnel, facilities, sites and technical information necessary for fulfilling its duties under the Order and AGI Greenpac and the Hold Separate Manager shall provide the Monitoring Agency and Divestiture Agency upon request with copies of any document required by the Monitoring Agency or the Divestiture Agency, as the case may be. AGI Greenpac shall make available to the Monitoring Agency and Divestiture Agency one or more offices on their premises.

42. AGI Greenpac shall provide the Monitoring Agency with the managerial and administrative support that it may reasonably request in relation to the management of the Divestment Business. AGI Greenpac shall provide and shall cause its advisors to provide the Monitoring Agency, on request, with the information submitted to potential purchasers, in particular give the Monitoring Agency access to the data room documentation and all other information granted to potential purchasers in the due diligence procedure.

43. AGI Greenpac shall inform the Monitoring Agency on potential purchasers, submit lists of all potential purchasers at each stage of the selection process, including the offers made by potential purchasers at those stages, and keep the Monitoring Agency informed of all developments in the Divestiture process.

44. AGI Greenpac shall indemnify the Monitoring Agency, its employees and agents and Divestiture Agency and its employees and agents (each an “Indemnified Party”) and hold each Indemnified Party harmless against any liabilities arising directly out of the performance of the Indemnified Party’s duties under the Order, except to the extent that such liabilities result from the wilful default, recklessness, gross negligence or bad faith of the Indemnified Party.

45. The Commission may share confidential information proprietary to the Divestment Business with the Monitoring Agency and Divestiture Agency, without seeking any approval from AGI Greenpac.

46. Prior to the completion of the transfer of the Divestment Business, AGI Greenpac shall secure all consents and waivers from all third parties that are required by the Approved Purchaser in relation to the Divestment Business. Provided, however, that AGI Greenpac may satisfy this requirement by certifying that the Approved Purchaser has, to the Approved Purchaser’s satisfaction, either (i) executed such agreements directly with each of the relevant Third Parties, or (ii) secured a similar contract with similar terms from the customers or from supplier(s) supplying such product or service.

47. The Commission may at any time request information from AGI Greenpac that is reasonably necessary for the effective implementation of the Order.

COSTS

48. The payment to the Monitoring Agency and the Divestiture Agency appointed by the Commission in relation to the services provided for the sale of Divestment Business shall be made by AGI Greenpac.

REMOVAL OF DIFFICULTY / REVIEW CLAUSE

49. The Commission may either on its own motion or based on a reasoned application filed by AGI Greenpac pass such order or direction as it deems fit, to address any unforeseen circumstances or difficulties in implementing the Order by AGI Greenpac.

Appendix A Affiliates Enterprises controlled by AGI Greenpac and/or by the ultimate parent of AGI Greenpac, including the ultimate parent, whereby the term “Enterprises” and “Control” shall bear the meaning provided in the Act. Approved Purchaser(s) The entity approved by the Commission as the acquirer of the Divestment Business in accordance with the criteria set out in Paragraph 8 (as the case may be) Sale and Purchase The sale and purchase agreement for the sale of Agreement(s) Divestment Business which has been duly approved by the Commission. Assets Shall mean the tangible and intangible assets in relation to the Divestment Business set out in Paragraph 11. Closing Date The date of the transfer of the Divestment Business to the Approved Purchaser. Confidential Information Any business secrets, know-how, commercial information, or any other information of a proprietary nature relating to the Divestment Business that is not available in public domain. Divestment Business shall mean and include the business of manufacturing glass products at the Rishikesh plant of HNG located at Virbhadra, Rishikesh, Dehradun District, Uttarakhand. Divestiture Shall mean the sale and transfer of the Divestment Business. The words, “divest”, “divested”, “divesting” and “divestment” shall be interpreted accordingly.

Divestiture Agency One or more natural or legal person(s), independent from AGI Greenpac, who is appointed by the Commission, and who has the duty to divest the Divestment Business during the Second Divestiture Period. The Monitoring Agency may be appointed as the Divestiture Agency by the Commission Effective Date As defined in the Resolution Plan of AGI Greenpac First Divestiture Period Period of [xxxxxxxxxxxx] from the ‘Effective Date’ as defined in the Resolution Plan of AGI Greenpac (or such extended period as may be agreed by the Commission) Hold Separate Manager means an individual with experience in the management, sales, marketing, or financial operations of such Divestment Business, who is appointed by AGI Greenpac to manage the Divestment Business till the completion of the transfer of the Divestment Business to the Approved Purchaser. Key Personnel employees who are necessary to maintain the viability and competitiveness of the Divestment Business. Monitoring Agency One or more natural or legal person(s), independent from AGI Greenpac, who is appointed by the Commission, and who has the duty to monitor AGI Greenpac’s compliance with the modifications provided in the Order. The Monitoring Agency may be appointed as the Divestiture Agency by the Commission. Order Final order of the Commission approving the Proposed Transaction under the relevant provisions of Section 31 of the Act.

Second Divestiture Period Second Divestiture Period shall commence and will last for a period of up to [xxxxxxxxxxx] (or such extended period as may be agreed by the Commission) from the end of the First Divestiture Period.