JSW Ventures Singapore Pte. Limited. — Combination C-2023/12/1088

Notice under Section 6(2) of the Competition Act, 2002 given by JSW Ventures Singapore Pte. Limited

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 11th December 2023, the Competition Commission of India (Commission) received a Notice under Section 6(2) of the Competition Act, 2002 (Act) given by JSW Ventures Singapore Pte. Limited (JSW Ventures/Acquirer). The Notice was filed pursuant to the execution of (i) Share Purchase and Share Subscription Agreement dated 30th November 2023, entered amongst the Acquirer, JSW International Tradecorp Pte. Limited (JSWIT), MG Motor India Private Limited (MG Motor India/Target) and the SAIC Motor HK Investments Limited (Seller); (ii) Shareholders‟ Agreement dated 30th November 2023 amongst the Acquirer, the Target, and the Seller; (iii) Technology Collaboration and Framework Agreement dated 30th November 2023, between JSWIT, the Target and SAIC Motor Corporation Limited; and (iv) Board resolution of the Acquirer dated 24th November 2023.

Combination Registration Number: C-2023/12/1088

2. 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 22nd December 2023, certain information and clarifications were sought from the Acquirer. The response to this letter was submitted by the Acquirer on 5th January 2024, after seeking extension of time (Response).

3. The transaction sought to be brought into effect, as notified by the Acquirer, entails the following: i. The Acquirer proposes to acquire approximately up to 38% shareholding in the Target, by way of (a) acquisition and subscription of equity shares representing 35% of the share capital (38.04% of the voting and economic rights at the time of acquisition) of the Target, on a fully diluted basis, along with the acquisition of a right to subscribe to the unsubscribed Dealer Shares (up to 3%), proposed to be issued by the Target as partly paid equity shares with no voting rights, on a fully diluted basis to the Dealers through a Dealer Pool (Initial Acquisition); and ii. The Acquirer getting a right to acquire additional percentage of the share capital of the Target upon occurrence of certain events, whereby the effective shareholding of the Acquirer may increase up to approximately 46% of the share capital of the Target (Subsequent Acquisition).

4. As regards the Subsequent Acquisition, it is noted that the Acquirer‟s right to acquire additional percentage of share capital is dependent upon occurrence of certain futuristic events. The Commission is of the view that the Subsequent Acquisition is not part of the present assessment and shall be dealt as per the applicable law at the time when the right to acquire additional percentage of share capital is exercised. Accordingly, the Commission has considered the scope of the Proposed Combination and the assessment of likelihood of AAEC only in terms of the Initial Acquisition.

5. It has also been submitted that alongside the Proposed Combination, an independent financial investor is also proposing to acquire certain shareholding and voting rights in the Target (IFI Investment). The same has been stated to be independent of the Combination Registration Number: C-2023/12/1088

Proposed Combination, for which the negotiations have been separately conducted by the concerned parties. Accordingly, as per the Acquirer, a separate filing has been made in respect of the IFI Investment with the Commission.

Description of the Parties

6. The Acquirer, a newly incorporated entity domiciled in Singapore, is a wholly owned subsidiary of JSW International Tradecorp Pte. Limited (JSWIT), and belongs to the JSW Group (Acquirer Group). The Acquirer Group has a presence in various sectors including steel, energy, infrastructure, cement, paints, venture capital, realty, and sports, with its workforce present across core India, USA, Europe, and Africa.

7. The Target, MG Motor India, is a private limited company incorporated in India and presently entirely held by the Seller and SAIC Motor International Company Limited. It is primarily engaged in the automobile Original Equipment Manufacturing (OEM) business, i.e., manufacture and sale of passenger cars (including electronic vehicles) under the its brand „MG‟. Additionally, MG Motor is also engaged in (i) sale of automobile parts and accessories for MG Cars through MG authorised dealers and the “My MG” app, (ii) providing after-sales services for MG Cars, and (iii) leasing out MG cars. MG Motor is also developing an electronic vehicle (EV) ecosystem in India to accelerate adoption of EVs. [Hereinafter, Acquirer, Acquirer Group and Target are collectively referred to as Parties.]

Assessment

8. For the purposes of overlap identification, the Acquirer has submitted that an affiliate of the Acquirer Group, i.e., JSW Steel Limited („JSW Steel‟), is engaged (directly/through its affiliates) in the manufacture and sale of (i) processed inputs, (ii) iron (including pig iron and sponge iron), (iii) semi – finished steel, (iv) finished steel products, i.e., hot rolled steel products, cold rolled steel products, coated and plated steel products, electrical steel and long steel products. As such, steel is a primary material for automotive manufacturers across the world and procured by the players present in the automotive supply chain for manufacturing auto-parts and passenger

Combination Registration Number: C-2023/12/1088 vehicles. As regards the development of EV ecosystem by the Target in India, it has been stated to be ancillary to its principal business of manufacture and sale of passenger cars. The Acquirer has also clarified that another entity of JSW Group, namely JSW Energy Limited (JSW Energy) is working on battery energy storage solutions but the same are used for grid storage applications and cannot be used for EVs, and as such JSW Energy does not have any presence in the EV battery cell sector.

9. Based on the presence of the Parties and their business activities as provided in the Notice and Response, following vertical linkages have been identified: (i) Vertical linkage between the Acquirer Group, through JSW Steel, which is engaged in the manufacture and sale of cold rolled closed annealed steel (upstream market) and MG Motor, which is engaged in the manufacture and sale of passenger vehicles (downstream market); and (ii) Vertical linkage between the Acquirer Group, through JSW Steel, which is engaged in the manufacture and sale of surface coated steel products (upstream market) and MG Motor, which is engaged in the manufacture and sale of passenger vehicles (downstream market).

10. With respect to the first vertical linkage, it has been submitted that JSW Steel has supplied cold rolled closed annealed steel to MG Motor, which is used by MG Motor for the manufacture of certain components/parts used in the production of its passenger vehicles. Given the miniscule percentage of the volume of cold rolled and closed annealed steel procured by the Target of the total volume of such product produced by JSW Steel, it appears unlikely that JSW will have an incentive to foreclose input to the competitors of downstream entities of the Target. Further, the market presence of JSW Steel and MG Motor for FY 22 – 23, is quantified by their market share in the range of [20 – 25]% and [0 – 5]% in their respective markets. Further, the Commission also looked into the extent of existing supply arrangement between the Acquirer and the Target as regards this vertical linkage reiterates. The Commission observed that out of the total volume of cold rolled closed annealed steel produced by JSW Steel, the volume procured by Target in FY 2022 – 23 is only a miniscule percentage. Similarly,

Combination Registration Number: C-2023/12/1088 the quantity of cold rolled and closed annealed steel procured by Target from JSW Steel out of its total requirement for the said input for FY 2022 – 23 was also found to be insignificant. Therefore, neither Acquirer Group nor MG Motor seems to have the ability or incentive to cause any foreclosure in their respective markets.

11. With respect to the second vertical overlap, it has been submitted that MG Motor sources galvanised steel, i.e., a type of surface coated steel product for manufacture of the components/parts used in the production of its passenger vehicle, from other steel manufacturers presently which can potentially be sourced from JSW Steel. The market share of JSW Steel and MG Motor are in the range of [45 – 50]% and [0 – 5]%, in their respective markets. Given the miniscule market shares of MG Motor, the Proposed Combination in not likely to confer any ability/ incentive on the part of the combined entity to engage in any foreclosure strategies.

12. Further, the upstream as well as downstream markets are characterised by other significant players posing competitive constraints on the parties. There has been entry of new players and the expansion by existing players in the upstream market. Tata Steel, Jindal Steel and Power Limited, SAIL, ArcelorMittal and Nippon Steel; POSCO; Vedanta Limited etc. are some of the players in the upstream markets posing competitive constraints on the parties.

13. 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.

14. The order may be 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.

Combination Registration Number: C-2023/12/1088

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