Jointly by Mr. Puneet Kothapa; Ms. Ponguru Sindhura and Ms. Ponguru Sharani — Combination C-2023/03/1008

Notice under Section 6(2) of the Competition Act, 2002 given by Mr. Puneet Kothapa, Ms. Ponguru Sindhura and Ms. Ponguru Sharani

CORAM:

Ms. Sangeeta Verma Acting Chairperson

Mr. Bhagwant Singh Bishnoi Member

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

1. On 14 March 2023, the Competition Commission of India (Commission) received a notice (Notice) under Section 6(2) of the Competition Act, 2002 (Act), given by Mr. Puneet Kothapa, Ms. Ponguru Sindhura and Ms. Ponguru Sharani (collectively referred to as the Acquirers) for the proposed acquisition of, inter alia, (i) 18.23 percent of the total issued and paid up share capital (fully diluted basis) of NSPIRA Management Services Private Limited (NSPIRA/Target) from NHPEA Minerva Holding BV (Seller 1); and (ii) 2.24 percent of the total issued and paid-up share capital from Banyantree Growth Capital II, LLC (Seller 2) (Proposed Combination). The Notice was given pursuant to the execution of Binding Term Sheet dated 7 March 2023 by and between the Acquirers, Target, Seller 1 and Seller 2.

(Combination Regn. No. C-2023/03/1008) 2. As submitted, the Acquirers also propose to acquire 0.05 percent of the shareholding in the Target Company on a fully diluted basis held by certain small shareholders. The Proposed Combination, inter-alia, also contemplates a merger of an entity owned by certain relatives of the Promoters (Finance Company) with the Target Company in terms of Section 230-232 of the Companies Act, 2013. Pursuant to the said merger, the Finance Company shall cease to exist and the shareholders of the Finance Company will hold less than 0.1 percent of the fully diluted equity shareholding in the Target Company.

3. The Proposed Combination involves the individuals and entities comprising the Narayana Group. The Narayana Group is engaged in running, inter alia, of K-12 schools across the country through separate trusts/societies viz., Narayana Educational Society (NES), Narayana Education Trust, and Narayana Educational Trust. As stated, the aforesaid three trusts/society which comprise the Narayana Group are severally controlled by Acquirers and their extended family1.

4. The Target is also a part of the Narayana Group. Mr. Puneet Kothappa and Ms. Ponguru Sindhura, are presently the Promoters of as well as Directors in the Target Company, holding 19.87 percent and 33.78 percent of the equity shareholding (on a fully diluted basis) of the Target, respectively. Ms. Ponguru Sharani currently owns 25.83 percent of the shareholding in the Target Company. As submitted, Ms. Ponguru Sharani presently does not exercise control over the Target but pursuant to the Proposed Combination, Ms. Ponguru Sharani will also gain joint control over the Target along with Mr. Puneet Kothappa and Ms. Ponguru Sindhura.

1 Mr. Puneet Kothapa is the President of NES, and Ms. Ponguru Sharani is one of the managing committee members of NES. None of the Acquirers have any position in the Narayana Education Trust and Narayana Educational Trust which are operated by their extended relatives. As submitted, NES operations account for more than 90 percent of the business (revenue wise) of the Narayana Group.

(Combination Regn. No. C-2023/03/1008) 5. The Target is engaged in provision of the school management services to schools run by Narayana Group. Further, the Target is also engaged in owning and running coaching centres and provision of B2C services of digital content and study material creation, as well as running provision of hostel accommodation/catering services for students.

6. It is observed that the impact of the Proposed Combination is to cause a change in control of the Target from existing joint control of Mr. Puneet Kothappa and Ms. Ponguru Sindhura, Seller 1 (which forms part of a fund managed or controlled by affiliate of Morgan Stanley) and Seller 2 to joint control of Mr. Puneet Kothappa, Ms. Ponguru Sindhura and Ms. Ponguru Sharani. Considering that the Acquirers are engaged in provision of educational institute management services, coaching services, hostel services and digital educational content creation services indirectly through the Target (or its subsidiary) itself, the aforesaid change in control is not expected to change the competition dynamics in any of the plausible markets in horizontal context that may be considered for assessment of the Proposed Combination.

7. Considering the activities of NES and that of the Target, vertical or complementary relationships may be observed. However, considering the presence of both the NES and the Target in the backdrop of nature of activities, overall sector and change in control dynamics, the Proposed Combination is not likely to change the competition dynamics in terms of vertical linkages as well.

8. 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 in any of the relevant market(s), and therefore, the Commission hereby approves the Proposed Combination under Section 31(1) of the Act.

(Combination Regn. No. C-2023/03/1008) 9. This order may be revoked if, at any time, the information provided by the Acquirers is found to be incorrect.

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

11. The Secretary is directed to communicate to the Acquirers accordingly.