BC Asia Investments X Limited — Combination C-2022/04/921

Notice under Section 6(2) of the Competition Act, 2002 jointly filed by BC Asia Investments X Limited, Bain Capital Investors, LLC, Bain Capital Credit Member, LLC, Bain Capital Credit Member II, Ltd. and Canada Pension Plan Investment Board

CORAM:

Mr. Ashok Kumar Gupta Chairperson

Ms. Sangeeta Verma Member

Mr. Bhagwant Singh Bishnoi Member

Order under Section 31(1) of the Competition Act, 2002

1. On 25.04.2022, the Competition Commission of India (Commission) received a notice under sub-section (2) of Section 6 of the Competition Act, 2002 (Act). The notice has been filed pursuant to, inter alia, (a) Share Purchase Agreement between certain selling shareholders of IIFL Wealth Management Limited (IIFLWM/Target) and BC Asia Investments X Limited (BC Asia/Acquirer) dated 30.03.2022, (b) a letter agreement between BC Asia and IIFLWM dated 31.03.2022, and (c) tax indemnity deeds between BC Asia and certain selling shareholders (General Atlantic Singapore Fund Pte. Ltd. and FIH Mauritius Investments Limited) of IIFLWM dated 30.03.2022

Combination Registration No. C-2022/04/921 and (d) Co-Investor Term Sheet, a binding term-sheet dated 30.03.2022 entered into between affiliates of Bain Capital Investors, LLC (Bain Private Equity), Bain Capital Credit Member, LLC and Bain Capital Credit Member II, Ltd. (together, Bain Credit) and Canada Pension Plan Investment Board (CPPIB). Initially, the notice was given only by BC Asia. Subsequently, Bain Private Equity, Bain Credit and CPPIB became notifying parties by furnishing relevant documents (Hereinafter, BC Asia, Bain Private Equity, Bain Credit, CPPIB and IIFLWM are collectively referred to as the Parties).

2. The proposed combination involves acquisition of 24.98% shareholding in IIFLWM by BC Asia, the vehicle indirectly owned and controlled by Bain Private Equity, Bain Credit and CPPIB (Proposed Combination).

3. In terms of Regulation 14 of Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (Combination Regulations), the Commission, vide communication dated 11.05.2022, sought certain information(s)/clarification(s), inter alia, relating to the activities of the Parties; the response to the same was received on 19.05.2022. As the response received was incomplete in certain respects, therefore, in continuation to the letter dated 11.05.2022, another communication dated 27.05.2022 was sent. The response to the same was received on 04.06.2022.

Description of the Parties

4. BC Asia is a company indirectly owned and controlled by Bain Private Equity, Bain Credit and CPPIB. It is an investment holding company incorporated under the laws of Mauritius. Its objective is to hold long-term investments. BC Asia by itself does not offer any products or services. It does not have any presence in India or undertake any business in India

Combination Registration No. C-2022/04/921

5. Bain Private Equity is a private equity investment firm that invests, through its family of funds, in companies across many industries, including information technology, healthcare, retail and consumer products, communications, financial and industrial/manufacturing. It is submitted that Bain Capital Investors, LLC is the ultimate controlling entity/general partner for Bain Private Equity Entities.

6. Bain Credit is a leading global credit specialist which invests up and down the capital structure and across the spectrum of credit strategies, including leveraged loans, high-yield bonds, distressed debt, private lending, structured products, non-performing loans and equities. Bain Capital Credit Member, LLC and Bain Capital Credit Member II, Ltd. are together the ultimate controlling entities/general partners for Bain Credit Entities.

7. CPPIB is a professional investment management organisation that invests the funds transferred to it by the Canada Pension Plan Fund (CPP Fund). CPPIB is a Canadian Federal Crown corporation in which the shares are held by the Canadian Federal Minister of Finance on behalf of Her Majesty, The Queen in Right of Canada. However, CPPIB is governed and managed independently of the CPP Fund and at arm’s length from the Government. CPPIB has one Indian subsidiary, CPPIB India, which does not hold or control any portfolio company and does not generate any investment related turnover.

8. IIFLWM is a private wealth management firm in India. It is listed on the National Stock Exchange of India Limited and Bombay Stock Exchange Limited. Further, it is a member of the Multi Commodity Exchange of India Ltd. and National Commodity & Derivatives Exchange Ltd. IIFLWM is the parent entity of all entities under the IIFL Wealth Management Group. IIFLWM, through its subsidiaries and associate companies, predominantly operates in the financial services sector, where it offers services such as wealth management, portfolio management, estate planning, provision of alternative investment funds and mutual funds.

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9. It is stated in the notice that Bain Private Equity, Bain Credit and CPPIB are not directly engaged in any business activities that are similar to or have vertically or complementary linkages with the business activities carried out by IIFLWM (including through its subsidiaries and associate companies). However, Axis Bank Limited (Axis Bank) (a portfolio company of Bain Private Equity and Bain Credit) is engaged in certain financial services also offered by IIFLWM.

Horizontal Overlaps

10. Mutual Funds: The Parties have submitted that both Axis Bank and IIFLWM are engaged in the business of offering equity-oriented, debt-oriented and hybrid (balanced) mutual fund schemes and that both sell mutual funds in the entire territory of India. Accordingly, the relevant market may be considered as the “the market for provision of mutual funds in India” (Relevant Market- 1). Further, both Axis Bank and IIFLWM have horizontal overlaps in the following narrower sub-segments within the market for provision of mutual fund schemes, i.e., (a) Provision of Equity Oriented Mutual Fund Schemes in India, (b) Provision of Debt Oriented Mutual Fund Schemes in India and (c) Provision of Liquid/Money Market Mutual Fund Schemes in India (Collectively, Narrow Mutual Fund Markets).

11. Wealth Management Services: The Parties have submitted that one of the portfolio companies common to Bain Private Equity and Bain Credit (i.e., Axis Bank) competes with IIFLWM in providing wealth management services and that both provide wealth management services in the entire territory of India. Accordingly, the relevant market may be considered as the “market for provision of wealth management services in India” (Relevant Market-2).

12. Portfolio Management Services: The Parties have submitted that Axis Bank is engaged in the business of providing portfolio management services. Similarly,

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IIFLWM is also engaged in the business of offering portfolio management services. Further, both Axis Bank and IIFLWM provide portfolio management services to customers located throughout the entire territory of India. Accordingly, the relevant market may be considered as the “market for provision of portfolio management services in India” (Relevant Market -3). Further, the Parties have submitted that they also have horizontal overlaps in the following narrower sub-segments (based on the extent of mandate given to the portfolio manager) within the market for provision of portfolio management services: (a) provision of discretionary portfolio management services in India (Discretionary PMS) and (b) provision of non-discretionary portfolio management services in India (Non-discretionary PMS) (Collectively, Narrow PMS Markets).

13. Alternate Investment Funds: The Parties have submitted that Alternate Investment Funds (AIFs) are alternatives to conventional investment instruments such as deposits, debt securities, mutual funds and stocks. It is submitted that both Axis Bank and IIFLWM are engaged in the business of provision of various AIFs for its customers/investors as an additional channel/mode for generating returns on their wealth/investments and that the services of setting-up and management of AIFs can be offered by both Axis Bank and IIFLWM to customers across India. Accordingly, the relevant market in the present case may be considered as the “market for provision of AIFs in India” (Relevant Market-4). Furthermore, it is submitted that both Axis Bank and IIFLWM also have horizontal overlaps in the following narrower sub-segments within the market for provision of AIFs: (a) Provision of category II AIF funds in India (AIF II) and (b) Provision of category III AIF funds in India (AIF III) (Collectively, Narrow AIF Markets).

Vertical Relationship

14. It is submitted in the notice that there are no supply arrangements between CPPIB/CPPIB Entities and IIFL and its subsidiaries. Further, it is submitted that Axis

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Bank has an arm’s – length business relationship with IIFLWM, whereby Axis Bank (a) maintains bank accounts for a few of the schemes operated by IIFLWM and (b) distributes a few of IIFLWM’s products to its end-consumers. It is stated in the notice that Axis Bank currently distributes some of the mutual fund schemes operated by IIFLWM on an arm's-length basis. Accordingly, the Parties have submitted that the relevant product market may be considered as the “market for mutual funds in India” (Upstream Market) for IIFLWM and the “market for distribution of mutual funds in India” (Downstream Market) for Axis Bank.

15. The Commission decided to assess the Proposed Combination in the segments identified by the Parties. However, exact delineation of the relevant market has been left open as the material available on record does not suggest that the proposed combination is likely to cause any competition concern in India.

Assessment of the Proposed Combination

16. Based on the submissions of the Parties regarding the horizontal overlaps between the Parties, it is noted that the Parties have a low combined market share in the range of [5-10]% in Relevant Markets 1, 2 and 4 and a negligible market share in the range of [0-5]% in Relevant Market 3, with increment only in the range of [0-5]%. Further, in each of the Narrow Mutual Fund Markets, the Parties exhibit low combined market share in the range of [5-10]%, with miniscule increment. With respect to the Narrow PMS markets outlined above, it is noted that the combined market share of the Parties in the Discretionary PMS market is miniscule and in the Non-discretionary PMS market is in the range of [10-15]%, with miniscule increments in both markets. In relation to the Narrow AIF markets, it is noted that the combined market share of the Parties in the AIF II market is in the range of [5-10]% and in the AIF III market is in the range of [10-15]%, with miniscule increments in both markets.

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17. It is noted from the submissions of the Parties that all the relevant markets are characterized by the presence of various players. Relevant Market 1 exhibits the presence of both private players such as ICICI Prudential Mutual Fund, Aditya Birla Sun Life Mutual Fund, Kotak Mahindra Mutual Fund and public sector players such as SBI Mutual Fund, LIC Mutual Fund and UTI Mutual Fund. Further, in each of the Narrow Mutual Fund Markets, other players are present, such as SBI Mutual Fund, HDFC Mutual Fund and ICICI Prudential Mutual Fund. Furthermore, in Relevant Market 2, competitive constraints are posed to the parties by other wealth management firms, which include (a) specialized wealth management firms (such as Julius Baer, Edelweiss Wealth Management), (b) banks which offer wealth management services as one of their services (such as HDFC Bank, ICICI Bank. etc.) and (c) independent financial experts. Likewise, Relevant Market 3 also exhibits the presence of other players such as SBI Funds, UTI Asset Management, etc., as well as individual experts and small and mid-size firms providing portfolio management services. Similarly, players such as SBI Asset Management, UTI Asset Management and ASK Investment Advisors are also present in each of the Narrow PMS Markets. Lastly, in Relevant Market 4 as well as Narrow AIF Markets, the Parties face competitive constraints from established banks as well as specialized asset management companies such as Kotak, Edelweiss, ICICI Prudential and Motilal Oswal.

18. With respect to the vertical relationship between IIFLWM in the upstream market for mutual funds in India and Axis Bank in the downstream market for distribution of mutual funds in India, it is noted that the market share of both IIFLWM and Axis Bank is in the range of [0-5]% in their respective markets. Besides there are other players in each of the markets such as SBI Mutual Fund, HDFC Mutual Fund and ICICI Mutual Fund in the upstream market and several banks, online portals and individual distributors/agents in the downstream market. Accordingly, based on the submissions of Parties, it appears that the vertical relationship is not likely to raise any competition foreclosure concern in India.

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19. Considering the facts on record, details provided in the notice given under sub-section (2) of Section 6 of the Act, and the assessment of the Proposed Combination on the basis of factors stated in sub-section (4) of Section 20 of the Act, the Commission is of the opinion that Proposed Combination is not likely to have an appreciable adverse effect on competition in India. Therefore, the Commission approves the Proposed Combination under Section 31(1) of the Act.

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

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

22. The Secretary is directed to communicate to the Parties accordingly.