International Finance Corporation — Combination C-2024/02/1114

Notice under Section 6(2) of the Competition Act, 2002 given by International Finance Corporation

CORAM:

Ms. Ravneet Kaur Chairperson

Mr. Anil Agrawal Member

Ms. Sweta Kakkad Member

Mr. Deepak Anurag Member

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

1. On 20th February 2024, the Competition Commission of India (‘Commission’) received a Notice under sub-section (2) of Section 6 of the Competition Act, 2002 (‘Act’) given by International Finance Corporation (‘Acquirer’). The notice was filed pursuant to the execution of the Share Subscription Agreement and Policy Agreement, each dated 2nd February 2024 between Acquirer and Northern Arc Capital Limited (‘Target’). Acquirer, Target, and certain other shareholders also entered into Amended and Restated Shareholders’ Agreement dated 2nd February 2024 [Hereinafter, Acquirer and Target are together are referred to as the ‘Parties’.]

2. The Proposed Combination envisages the acquisition of up to eight million four hundred and ninety-one thousand and forty-eight (8,491,048) fully paid Series C CCPS (‘Subscription Shares’) in the Target by the Acquirer by way of a Share

Subscription Agreement that has been entered into between the Parties. The Subscription Shares represent approximately 6% of the total issued and paid-up share capital of Target on a fully diluted basis. Along with that, the Acquirer will also get certain affirmative voting rights and board nomination rights.

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’), vide letter dated 29th February 2024, certain information and clarifications were sought from the Acquirer. The Acquirer submitted the response to the same vide letter dated 7th March 2024. The Acquirer also made certain submissions on 19th March 2024.

4. IFC, a member of the World Bank Group, is stated to be the largest global development institution focused on the private sector in emerging markets. IFC primarily provides financial assistance and makes investments in private enterprises, located in its member countries, including India. It also provides advisory services and asset management services. IFC generally makes investments on its own account and has investments across various sectors in India such as financial services, infrastructure, manufacturing, agribusiness, and services, etc.

5. Target is a company registered in India and is also registered with the Reserve Bank of India (‘RBI’) as a Non-Banking Financial Company. It is mainly engaged in the provision of loans and lending services and offers a variety of services in the financial services sector.

6. It is submitted that the Acquirer through its certain affiliates exhibits horizontal overlaps with the Target in the broad segment of loans and lending services in India and the narrow segments of provision of loans, inter alia, in consumer finance, microfinance, supply chain finance, MSME loans and agriculture finance.

7. The Commission decided to leave the delineation of the relevant market open, as it was observed that the Proposed Combination is not likely to cause an appreciable adverse effect on competition in any of the plausible relevant market(s) in India because of the reasons mentioned in the subsequent paragraph.

8. Based on the submissions, the Commission noted that the combined market shares of the Parties in the broad segment as well as in overlapping sub-segments thereof, are insignificant. Further, there are large players such as State Bank of India, HDFC Bank, ICICI Bank, Punjab National Bank, Axis Bank, etc. and other small finance banks present in these segments which are providing similar services. With regards to the vertical linkage also, the Commission noted that the relationship between one of the affiliates of Acquirer and Target is not such which can cause any competition concern in any market/segment.

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

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

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

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