BXG Xenon HoldCo Ltd, Intertrust — Combination C-2022/02/906

Notice under Section 6 (2) of the Competition Act, 2002 given by BXG Xenon HoldCo Limited

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 10th February 2022, the Competition Commission of India (Commission) received a notice (Notice) under Section 6(2) of the Competition Act, 2002 (Act), given by BXG Xenon HoldCo Ltd (Acquirer). The Notice was given pursuant to execution of the Securities Subscription Agreement inter alia between BusyBees Logistics Solutions Private Limited (Target), Acquirer and Mr. Supam Maheshwari on 7th February, 2022 (SSA) (Share Subscription); Share Purchase Agreement inter alia between Target, Acquirer and Alibaba.com Singapore E-Commerce Private Limited (Alibaba) on 7th February, 2022 (Alibaba SPA); Share Purchase Agreement inter alia between Target, Acquirer and SAIF Partners India IV Limited (SAIF) on 7th February, 2022 (SAIF SPA) (Share Purchase); Addendum to the Amended and Restated Shareholder’s Agreement inter alia between Target, Mr. Supam Maheshwari, Mr. Amitava Saha (Founders), Mrs. Sampada Maheshwari, Mr. Prashant Jadhav, Mr. Sanket Hattimattur (Other Shareholders) and The Busybees Trust 22nd October 2020 (SHA) (SHA Addendum).

2. The Commission, vide its letter dated 24th February 2022, issued under Regulation 14(3) of the Competition Commission of India (Procedure in regard to transaction of business relating to combinations) Regulations, 2011, required the notifying party to remove defects in the Notice and furnish certain information relevant for the purpose of assessment of the Proposed Combination. The notifying party submitted its response vide submission dated 2nd March 2022. A voluntary submission was made by the Acquirer on 17th March 2022.

3. The Proposed Combination envisages the acquisition of 13.61% of the equity shareholding of the Target on a fully diluted basis by the Acquirer. The equity shareholding that will be acquired is an aggregate of both the primary and secondary share acquisition. The Acquirer also has the right to representation on the board of the Target.

4. The Acquirer is controlled by funds advised and/or managed by affiliates of Blackstone Inc. (collectively, Blackstone Group). It has not been engaged in providing any products/services and/or performing the business of investment holding in India or worldwide since its incorporation. Blackstone Inc. operates as an investment management firm.

5. The Target is engaged in the business of providing logistics and delivery solution services in India. It is the ultimate holding entity within its group. It has one direct subsidiary in India, i.e., Nimbuspost Private Limited (Nimbuspost). Further, Nimbuspost has one wholly owned subsidiary in India, i.e., Monster Wholesale Private Limited (MWPL).

6. The Target operates in India using the brand name ‘Xpressbees’ and provides a range of services falling within the logistics sector, including: (a) Express parcel shipping services; (b) B2B Part Truck Load and Full Truck load freight services; (c) Cross border Logistics; (d) 3PL / Contract Logistics; (e) Online logistics aggregation services; (f) B2B marketplace enabling sellers to sell products online to B2B customers; and (g) Supply of logistics, shipping, and other related services. The Target provides one-stop logistics services which include transportation through ground, air, and ocean solutions; storage and distribution services; freight; and overall fulfilment services to various customers.

7. The Target also manages storage and processing capacity across five fulfilment centres. Its operations in fulfilment comprises inbound, outbound, and processing of customers’ orders through integrated warehouse management system (WMS) solutions. Further, it operates hubs where activities such as processing of the shipments of customers are conducted. These hubs are solely captively used for the purposes of providing end-to-end services. It also provides storage, picking, and packing for third-party customers as a suite of services through its five fulfilment centres.

8. It has been submitted that, for the purposes of overlaps analysis, the portfolio companies of Blackstone Group which meet the materiality threshold (BX Portfolio Companies)1 have been considered. Such BX Portfolio Companies that are active in the leasing of commercial warehouses sector are hereby known as Relevant Portfolio Entities.

9. It has been submitted that there are no horizontal overlaps between the business activities of the Acquirer and the Target in India, as the Relevant Portfolio Entities own and operate warehouses which are leased out to third parties engaged in e-commerce, renewables, 3PL, retail, automotive, light engineering, etc., while the activities of the Target are limited to captive use for providing end-to-end services to third-party customers only. However, it is possible that the commercial warehousing services of the Target may be leased to third-party consumption, or the market participants may consider using the commercial space provided by the Target. Therefore, competition assessment in the markets for the provision of commercial warehousing services is warranted. Further, the market related to leasing of space in modern commercial warehouses can be classified into: (i) Grade A – increased clear height, higher floor load strength, fire safety, energy conservation and park amenities such as all-time security, restrooms for rivers, better proximity to highways and well-maintained internal roads, etc.; and (ii) Grade B – other spaces. 10. With regard to the geographic market, it has been submitted that the activities of Blackstone Group and the Target overlap only in (a) Delhi-NCR; and (b) Bengaluru, since the Target does not have presence by way of storage space in any other city except Delhi- NCR and Bangalore. 11. In view of the above, the assessment has been carried out for the following markets, along with segmentation based on Grades of the commercial warehousing space: a) provision of commercial warehousing services in India (Pan-India Market); b) provision of commercial warehousing services in Delhi and National Capital Region (Delhi-NCR Market); and 1 (i) direct or indirect shareholding of 10% or more; or (ii) a right or ability to exercise any right that is not available to an ordinary shareholder; or (iii) a right or ability to nominate a director or observer in another enterprise(s).

c) provision of commercial warehousing services in Bangalore (Bengaluru Market).

12. However, the precise delineation of the relevant market is left open as it is observed that the proposed combination is not likely to cause appreciable adverse effect on competition (AAEC) in India in any of the plausible relevant markets. 13. The combined market share of the Target and Acquirer (through the Relevant Portfolio Entities) on a pan-India basis is less than 5%, and on a city-wise basis is not more than 10% (in terms of the volume, i.e., developed area in lakh square feet) in each of the markets for provision of commercial warehousing services. The Relevant Portfolio Entities only operate in commercial warehousing space in Grade A, while the Target uses both the Grade A and Grade B space. Also, the Target’s commercial warehousing services are limited to captive use for providing end-to-end services to third-party customers only. The market share of the Relevant Portfolio Entities in the narrower category of Grade A commercial warehousing services in India is less than 10%. Also, the share of the Relevant Portfolio Entities would not exceed 20% in the narrower category for Grade A warehousing services both in Delhi-NCR and Bengaluru. Additionally, a majority of the competitors in the commercial warehousing market, i.e., Indospace Core, Mahindra Logistics Ltd., etc., primarily operate in the Grade A space, with comparatively high shares in the narrower segments of both Delhi-NCR and Bengaluru. Furthermore, the customers of the Relevant Portfolio Entities include entities such as etc., which can exert competitive constraints on the Relevant Portfolio Entities irrespective of the Grade of warehouse and ensure that there is no AAEC in any identified market segment.

14. With regard to vertical overlaps, it has been submitted that, while there is no actual vertical and/or complementary relationship between the Acquirer and the Target, there exists only a potential vertical and/or complementary relationship between the activities of the Relevant Portfolio Entities and the Target. However, the Target provides a range of services falling within the logistics sector. The activities of the Target as a logistics service provider and the activities of the Relevant Portfolio Entities of the Acquirer in terms of leasing out commercial warehouses constitute a potential vertical and/or complementary overlap as: (a) Provision of commercial warehousing services – Upstream Market and (b) Logistics Services – Downstream Market.

15. The upstream market of the provision of commercial warehousing services is required for different kinds of logistics services, such as express parcel shipping services, 3PL/contract logistics, online logistics aggregation services, B2B marketplace enabling sellers to sell products online to B2B customers, and supply of logistics, shipping, and other related services, etc., that are present in the downstream market. Therefore the provision of commercial warehousing services may be sub-segmented for these different kinds of logistics services. In this regard, the commercial warehousing services are offered by the Target along with other logistics services depending upon the needs of the customer, and the size and position of the Target is not such as to cause competition concerns in these sub-segments.

16. The combined market share of the Target and Acquirer (through the Relevant Portfolio Entities) on a pan-India basis is less than 5%, and on a city-wise basis is not more than 10% (in terms of the volume, i.e., developed area in lakh square feet) in each of the markets for provision of commercial warehousing services. The market share of the Target in the market for provision of commercial warehousing services is less than 5% in the broader region of India, and the regions of Delhi-NCR and Bengaluru. Therefore, the aggregate space leased by the Target is limited in the overlapping cities where the Relevant Portfolio Entities have a presence. The Proposed Combination would not lead to a situation where the Acquirer or the Target would be able to or be incentivized to vertically foreclose the markets and is not likely to raise any competition concerns.

17. Furthermore, the Target possesses a minuscule market share (in terms of value, i.e., overall revenue generated for FY 2020–21) of less than 5% in the provision of logistics services. It also faces competitive constraints from major players such as Delhivery, Blue Dart Express Limited, TCI Express Limited, and Mahindra Logistics Limited. Hence, given the nature of the logistics sector and the low market shares of the Parties in the upstream and downstream markets, the Proposed Combination is not likely to cause any foreclosure concerns.

18. Considering the facts on record, including details provided in the Notice given under Section 6(2) of the Act and assessment of the Proposed Combination based on the factors stated in Section 20(4) of the Act, the Commission is of the opinion that the Proposed Combination is not likely to have any appreciable adverse effect on competition in India in any of the relevant market(s), and therefore, the Commission hereby approves the same under Section 31(1) of the Act.

19. This order may be revoked if, at any time, the information provided by the notifying party is found to be incorrect.

20. The information provided by the notifying party is confidential at this stage in terms of and subject to the provisions of Section 57 of the Act.

21. The Secretary is directed to communicate to the notifying party accordingly.