Housing Development Finance Corporation Limited — Combination C-2023/05/1032

Notice under Section 6(2) of the Competition Act, 2002 filed by Housing Development Finance Corporation Limited

CORAM:

Ms. Ravneet Kaur Chairperson

Ms. Sangeeta Verma Member

Mr. Bhagwant Singh Bishnoi Member

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

1. On 26th May 2023, the Competition Commission of India (Commission) received a notice under sub-section (2) of Section 6 of the Competition Act, 2002 (Act), filed by Housing Development Finance Corporation Limited (HDFC Limited/Acquirer). The notice has been given pursuant to the board resolution dated 4th May 2023 passed by the board of directors of the HDFC Limited read along with the disclosure made by HDFC Limited to the National Stock Exchange of India Limited (NSE) and BSE Limited (BSE).

2. The proposed combination is an acquisition of up to 3% additional shareholding of HDFC Life Insurance Company Limited (HDFC Life/Target) by HDFC Limited through one or more on-market purchases over the stock exchanges (Proposed Combination), such that HDFC Limited (after the Proposed Combination) and the Combination Registration No. C-2023/05/1032 surviving amalgamated entity, i.e., HDFC Bank Limited (HDFC Bank) (after the effective date of the Proposed Amalgamation1) will hold over 50% of the shareholding of HDFC Life in compliance with Indian banking laws post the Proposed Amalgamation coming into effect. (Hereinafter, HDFC Limited and HDFC Life are collectively referred to as the Parties)

Description of the Parties

3. HDFC Limited is a public limited company incorporated under the Companies Act, 1956, and its shares are listed on the NSE and BSE. It is a housing finance company registered with the National Housing Bank and the Reserve Bank of India (RBI). HDFC Limited is primarily engaged in the business of providing finance to individuals, corporates and developers for the purchase, construction, development and repair of houses, apartments and commercial properties in India.

4. HDFC Bank is a public limited company incorporated under the Companies Act, 1956, and its shares are listed on the NSE and BSE. It is registered with the RBI as a banking company. HDFC Bank is engaged in the business of providing a range of banking and financial services, including retail banking, wholesale banking and treasury operations through various branches in India.

5. HDFC Life is a life insurance company registered with the Insurance Regulatory and Development Authority of India (IRDAI). HDFC Life offers a range of individual and group life insurance solutions, including participating, non-participating and unit linked insurance policies. Its product portfolio comprises various life insurance and investment products, such as protection, pension, savings, investment, annuity and health. Further, it is stated in the notice that HDFC Life also provides certain fixed benefits products like cancer care, cardiac care and easy 1 It is mentioned in the notice that the Commission vide order dated 12th August 2022 in Combination Registration No. C-2022/06/942 has approved the proposed combination comprising: (a) amalgamation of HDFC Investments Limited and HDFC Holdings Limited into and with HDFC Limited, such that HDFC Limited would be the surviving entity post this step; and (b) amalgamation of the amalgamated HDFC Limited into HDFC Bank Limited (HDFC Bank), such that HDFC Bank will be the surviving entity post this step (collectively, the Proposed Amalgamation).

Combination Registration No. C-2023/05/1032 health and riders pertaining to health benefits along with its primary life insurance policies.

6. It is stated in the notice that the Parties form part of the HDFC group, which collectively refers to HDFC Limited (as the ultimate holding company, and currently, the single largest shareholder of HDFC Bank and HDFC Life) and its subsidiaries, associate entities and joint venture entities which, together, are a group of entities primarily active in the provision of financial services in India.

Identification of overlaps

7. With respect to horizontal overlaps, it is submitted that the services of the Parties/their group entities/their affiliates overlap in the National Pension Scheme (NPS) enrolment/distribution-activities. Therefore, the relevant product market can be considered as ‘enrolment/distribution of NPS’. Further, the relevant geographic market can be considered as pan-India. Accordingly, the relevant market can be defined as the ‘market for enrolment/distribution of NPS in India’.

8. Regarding existing supply arrangements, it is submitted that each of HDFC Bank, HDFC Securities Limited (HDFC Securities), HDB Financial Services Limited (HDB) and HDFC Credila Financial Services Limited (HDFC Credila) have engaged in the distribution of life insurance products and services for HDFC Life. However, CSC E-Governance Services India Limited (CSC) has not engaged in the distribution of life insurance products and services for HDFC Life. Moreover, neither HDFC Limited, HDFC Bank, HDFC Securities nor CSC has engaged in the enrolment/distribution of NPS in India as a point of presence (POP) for HDFC Pension as POPs liaise with the trustee bank, the Central Recordkeeping Agency (CRA) and pension fund managers for transmitting contributions received from, and paying out benefits to, the subscribers.

Combination Registration No. C-2023/05/1032

9. With respect to vertical relationship amongst the Parties, the following vertical linkages have been identified in relation to their activities in India: (i) Provision of life insurance products and services in India by HDFC Life at the upstream level and the distribution of life insurance products and services in India by HDFC Bank, HDFC Securities, HDB and HDFC Credila and CSC at the downstream level; and (ii) Pension fund management business in India by HDFC Pension at the upstream level and the enrolment/distribution of NPS in India by HDFC Limited, HDFC Bank, HDFC Securities and CSC at the downstream level. Accordingly, it is submitted that the relevant markets can be defined as: (i) ‘The upstream market for provision of life insurance products and services in India’ vertically linked with ‘The downstream market for distribution of life insurance products and services in India’; (ii) ‘The upstream market for pension fund management business in India’ vertically linked with ‘The downstream market for enrolment/distribution of NPS in India’.

10. 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 concerns in India.

Assessment of the Proposed Combination

11. Based on the submissions of the Acquirer in relation to horizontal overlaps, it is noted that both the combined and the individual market share of each of HDFC Limited, HDFC Bank, HDFC Securities, CSC and HDFC Pension in the relevant market for enrolment/distribution of NPS in India were in the range of [0-5]%, in terms of volume, in F.Y. 2021-22. Further, there were over 100 POPs registered with the Pension Fund Regulatory and Development Authority (PFRDA) for enrolment/distribution of NPS including Religare Broking Limited, ICICI Securities Limited, Bajaj Capital Limited, IIFL Securities Limited and Muthoot Finance Limited, amongst others.

Combination Registration No. C-2023/05/1032

12. Based on the submissions of the Acquirer with respect to vertical relationship in the life insurance-related activities, it is noted that the market share of HDFC Life in the upstream market for provision of life insurance products and services in India was in the range of [5-10]% and [0-5]% in terms of value and volume, respectively, in FY 2021-22. Further, the combined market share of HDFC Bank, HDFC Securities, HDB, HDFC Credila and CSC in the downstream market for distribution of life insurance products and services in India was in the range of [5-10]%, both in terms of value and volume, in F.Y. 2021-22. Moreover, there are several players in the upstream market for provision of life insurance products and services in India, such as Life Insurance Corporation of India, SBI Life Insurance Company Limited and ICICI Prudential Life Insurance Company Limited, as well as in the downstream market for distribution of life insurance products and services in India such as State Bank of India, Punjab National Bank, ICICI Bank and Bank of Baroda.

13. Based on the submissions of the Acquirer with respect to vertical relationship in the pension fund-related activities, it is noted that the individual as well as combined market shares of the Parties/their group entities/their affiliates in both the upstream and the downstream market was only in the range of [0-5]% in F.Y. 2021-22. Further, there are several players present in the upstream market for pension funds which exert competitive constraints such as SBI Pension Funds Private Limited, LIC Pension Fund Limited and UTI Retirement Solutions Limited; and there were over 100 POPs registered with the PFRDA for enrolment/distribution of NPS including Religare Broking Limited, ICICI Securities Limited, Bajaj Capital Limited, IIFL Securities Limited, amongst others, in the downstream market for enrolment/distribution of NPS in India.

14. Considering the material on record, including the details provided in the notice given under Section 6(2) of the Act, and the assessment of the Proposed Combination on the basis of factors stated in Section 20(4) of the Act, the Commission is of the opinion that Proposed Combination is not likely to have an Combination Registration No. C-2023/05/1032 appreciable adverse effect on competition in India. Therefore, the Commission approves the Proposed Combination under Section 31(1) of the Act.

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

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

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