Housing Development Finance Corporation Limited — Combination C-2023/05/1033

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 30th 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 filed pursuant to the Share Purchase Agreement dated 29th May 2023 entered into between HDFC Limited, ERGO International AG (the other joint venture partner of HDFC ERGO) and HDFC ERGO General Insurance Company Limited (HDFC ERGO/Target) (with HDFC Bank as a confirming party).

2. The proposed combination envisage the acquisition by HDFC Limited of certain equity shares comprising 0.5097% additional shareholding in HDFC ERGO on a spot delivery

Combination Registration No. C-2023/05/1033 basis from ERGO International AG (the Proposed Transaction) such that HDFC Limited (after the Proposed Transaction) and the surviving amalgamated entity i.e. HDFC Bank (after the effective date of the Proposed Amalgamation1) will hold 50.50% of the shareholding of HDFC ERGO in compliance with Indian banking laws post the Proposed Amalgamation coming into effect (Proposed Combination). (Hereinafter, HDFC Limited and HDFC ERGO are collectively referred to as the Parties).

3. Certain information(s)/clarification(s) necessary in order to carry out the competition assessment of the Proposed Combination were sought; response to the same was received on 09th June 2023.

Description of the Parties

4. HDFC Limited is a public limited company incorporated in India and its shares are listed on the National Stock Exchange of India Limited (NSE) and BSE Limited (BSE). It is a housing finance company registered with the National Housing Bank and the Reserve Bank of India and 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.

5. HDFC ERGO a public limited company incorporated in India and is registered with the Insurance Regulatory and Development Authority of India for providing general insurance (i.e. non-life insurance) products in India. It offers a range of general insurance products including motor, health, travel, home and cyber insurance in the retail space and customized products like property, rural, marine, trade credit, liability and other specialised insurance in the corporate space.

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 of: (a) amalgamation of HDFC Investments Limited (HDFC Investments) and HDFC Holdings Limited (HDFC Holdings) 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-2023/05/1033

6. 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 and 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.

7. It is submitted 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 ERGO) 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 and relevant markets

8. It is submitted by the Parties that HDFC Limited (including its affiliates) on one hand, and HDFC ERGO (including its affiliate) on the other, exhibit overlaps in distribution of general insurance products and services in India. Further, the Parties have defined the relevant market as the “market for distribution of general insurance products and services in India” (Horizontal Relevant Market).

9. The Parties have identified the following vertical linkage with respect to their activities in India in the notice i.e., provision of general insurance products and services in India by HDFC ERGO (at the upstream level) and the distribution of general insurance products and services in India by HDFC Bank, HDFC Securities Limited, HDB Financial Services Limited, HDFC Credila Financial Services Limited and CSC E-Governance Services India Limited (at the downstream level). Further, the Parties have defined the following relevant vertically linked markets: (a) the upstream market for provision of general insurance products and services in India (Upstream Market); and (b) the downstream market for distribution of general insurance products and services in India (Downstream Market).

Combination Registration No. C-2023/05/1033

10. The Commission decided to assess the Proposed Combination in the relevant markets identified by the Parties in the notice. However, exact delineation of the relevant markets is being 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 Parties, it is noted that the combined market share of the Parties in the Horizontal Relevant Market is [0-5]% both in terms of volume and value, respectively. Further, there are other players present in the market such as Marsh India Insurance Brokers, Aditya Birla Insurance Brokers, Mahindra Insurance Brokers, ICIC Bank who will continue to pose the competitive constraints to the Parties post the Proposed Combination.

12. With regard to vertical relationship, based on the submissions it is noted that the Target has a market share of [0-5]% and [0-10]% in Upstream Market both in terms of volume and value, respectively; and the Acquirer has a market share of [0-5]% in terms of both volume and value in the Downstream Market. Further, the Upstream Market is characterised by the presence of entities such as The New India Assurance Company Limited, ICICI Lombard General Insurance Company Limited, United India Insurance Company Limited, The Oriental Insurance Company Limited and also the Downstream Market has presence of other players such as Marsh India Insurance Brokers, Aditya Birla Insurance Brokers, Mahindra Insurance Brokers.

13. 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 appreciable adverse effect on competition in India. Therefore, the Commission approves the Proposed Combination under Section 31(1) of the Act.

Combination Registration No. C-2023/05/1033

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

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

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