HSBC Asset Management (India) Private Limited — Combination C-2022/01/900

Notice under Section 6(2) of the Competition Act, 2002 given by HSBC Asset Management (India) Private 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 20 January 2022, the Competition Commission of India (Commission) received a notice (Notice) under Section 6(2) of the Competition Act, 2002 (Act), given by HSBC Asset Management (India) Private Limited (Acquirer/HSBC AMC). The Notice was given pursuant to the execution of the Transfer Agreement dated 23 December 2021 (Transfer Agreement) entered into amongst HSBC AMC, HSBC Securities and Capital Markets (India) Private Limited (HSBC Sponsor), HSBC Trustee1, L&T Investment Management Limited (L&T AMC/Target), L&T Finance Holdings Limited (L&T Sponsor), and L&T Mutual Fund Trustee Limited (L&T Trustee) (Hereinafter, the Acquirer and the Target are collectively referred to as Parties).

1 HSBC Trustee comprises individuals constituting a board of trustees.

2. The proposed combination relates to the acquisition of 100% share capital of L&T AMC from L&T Sponsor and its nominees by HSBC AMC and its nominees. Simultaneously, there will be a change in the sponsorship, trusteeship, management, and administration of the L&T Mutual Fund schemes (L&T MF) managed by L&T AMC, whereby the L&T MF schemes will be managed and operated by HSBC AMC and the HSBC Trustee shall be appointed the as trustee of the L&T MF (Proposed Combination). Pursuant to the Proposed Combination, certain schemes of L&T MF will be merged/consolidated with the identified schemes of HSBC Mutual Fund schemes (HSBC MF), and the L&T MF will comprise part of and be considered to form an integral part of HSBC MF.

3. In terms of Regulation 14 of the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (Combination Regulations), the Commission, vide its communication dated 10 February 2022, sought certain information(s)/clarification(s), inter alia, relating to overlaps and activities of the Parties; the response to the same was received on 17 February 2022, after seeking extension of time. Certain further clarification(s)/information(s) were provided on 18 February 2022.

4. HSBC AMC is a private limited company incorporated under the provisions of the Companies Act, 1956. HSBC AMC is a wholly owned subsidiary of HSBC Sponsor which, in turn, is ultimately held by HSBC Holdings plc (HSBC Group). HSBC AMC is the asset management entity operating the day-to-day functioning of HSBC MF schemes. It also provides portfolio management services (PMS) and investment advisory services to clients.

5. HSBC Trustee is the trusteeship and holds the fiduciary responsibility for the administration and management of the money, property, and assets under the HSBC MF schemes. It holds the responsibility for the internal regulation of the mutual funds (MF) business housed in HSBC AMC.

6. L&T AMC is an unlisted public limited company and is a wholly owned subsidiary of L&T Sponsor. L&T AMC is the asset management entity operating the day-to-day functioning of L&T MF schemes. L&T AMC is registered with SEBI under the SEBI (Mutual Funds) Regulations, 1996 (MF Regulations). L&T AMC manages the investment portfolios of the L&T MF schemes and provides various administrative services to L&T MF. L&T AMC is also licenced to provide PMS to clients under the Securities and Exchange Board of India (SEBI) (Portfolio Managers) Regulations, 2020. However, it is not currently engaged in the provision of PMS2.

7. Based on the submissions of the Acquirer, it is observed that the Parties exhibit horizontal overlaps at the (a) broad level of market for mutual funds in India (Broad Relevant Market) and (b) narrow level of (i) market for equity-oriented mutual funds schemes in India; (ii) market for debt-oriented mutual funds schemes in India; and (iii) market for hybrid mutual funds schemes in India [(i), ii) and (iii) are collectively referred to as Narrow Relevant Markets].

8. The Commission decided to leave the precise delineation of the relevant market(s) open in the present case as it is observed that the Proposed Combination is not likely to cause an appreciable adverse effect on competition in any of the plausible relevant market(s) that could be delineated.

9. Based on the submissions of the Acquirer, the assessment has been carried out in terms of volume (no. of schemes) and value (by AAUM3). It is observed that the combined market share of the Parties in Broad Relevant market and Narrow Relevant Markets are in the range of [0–5%]. Further, there are other players in the market, such as SBI MF, HDFC MF, ICICI Prudential MF, Aditya Birla Sun Life MF, Kotak Mahindra MF, etc., who will continue to pose competitive constraints to the Parties post the Proposed Combination.

2 It is submitted that L&T AMC will surrender its registration as a PMS Manager to SEBI upon closing of the Proposed Combination. 3 Average Assets Under Management.

10. With regard to vertical relationships, it is observed that there is an existing vertical relationship between the supply of mutual fund products in India by L&T MF (upstream market) and mutual fund distribution in India by the Acquirer’s affiliate banking arm, The Hongkong and Shanghai Banking Corporation Limited (HSBC Bank) (downstream market). The market share of the Acquirer in the segment of distribution of mutual funds in India insignificant to raise any competition concerns. The segment of distribution of mutual funds is also characterised by the presence of several other players, such as HDFC Bank, State Bank of India, Axis Bank, etc.

11. With regard to complementary relationships, the Commission observed that there is a complementary relationship between the activities of Parties, as the Acquirer is engaged in PMS in India and Target is engaged in the market of mutual funds in India. It is submitted that the market share of HSBC AMC in the Indian PMS market by value is insignificant, and this market is highly fragmented, with over 300 portfolio managers registered with SEBI. Based on the information submitted by the Acquirer, it appears that the presence of the Parties in these markets/segments is not such as to cause any competition foreclosure in India. Further, these markets/segments are characterised by the presence of several players.

12. Considering the material on record, including the details provided in the Notice and the assessment of the Proposed Combination based on 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. Therefore, the Commission approves the Proposed Combination under Section 31(1) of the Act.

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

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

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