Keimed Private Limited and others — Combination C-2022/10/979

Notice under Section 6(2) of the Competition Act, 2002 jointly given by Keimed Private Limited, Palepu Pharma Private Limited, Medihauxe International Private Limited, Shree Amman Pharma Private Limited, ShanBalaji Pharma Private Limited, Vardhman Pharma Distributors Private Limited, Lucky Pharmaceuticals Private Limited, Meher Distributors Private Limited, New Amar Agencies Private Limited, Neelkanth Drugs Private Limited, Lifeline Pharmaceutical Private Limited, Medihauxe Pharma Private Limited, Vasu Agencies Hyd Private Limited, Vasu Pharma Distributors Hyd Private Limited, Vasu Vaccines & Speciality Drugs Private Limited, Venkatasai Agencies Hyd Private Limited, Dhruvi Pharma Private Limited, ATC Pharma Private Limited, Singla Medicos Pharma Private Limited, and Adeline Pharma Private Limited

CORAM: Ms. Sangeeta Verma Acting Chairperson

Mr. Bhagwant Singh Bishnoi Member

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

1. On 20 October 2022, the Competition Commission of India (Commission’) received a Notice under Section 6(2) of the Competition Act, 2002 (Act), jointly given by Keimed Private Limited (Keimed) and its subsidiaries, i.e., Palepu Pharma Private Limited, Medihauxe International Private Limited, Shree Amman Pharma Private Limited, ShanBalaji Pharma Private Limited, Vardhman Pharma Distributors Private Limited, Lucky Pharmaceuticals Private Limited, Meher Distributors Private Limited, New Amar

Agencies Private Limited, Neelkanth Drugs Private Limited, Lifeline Pharmaceutical Private Limited, Medihauxe Pharma Private Limited, Vasu Agencies Hyd Private Limited, Vasu Pharma Distributors Hyd Private Limited, Vasu Vaccines & Speciality Drugs Private Limited, Venkatasai Agencies Hyd Private Limited, Dhruvi Pharma Private Limited, ATC Pharma Private Limited, Singla Medicos Pharma Private Limited, and Adeline Pharma Private Limited (collectively the Merging Parties, Keimed and Merging Parties are collectively referred to as the Parties).

2. The proposed combination involves internal restructuring of Keimed. As submitted, the internal restructuring will be implemented in two steps: (i) firstly, the businesses of the Merging Parties will be transferred into their respective wholly owned subsidiaries by way of slump sales (Slump Sales) pursuant to separate Business Transfer Agreements (BTAs); and (ii) secondly, the Merging Parties will be merged into Keimed by way of separate schemes of amalgamation, and the shareholders of each of the Merging Parties will become shareholders of Keimed, with each of them acquiring minority shareholding in Keimed with no accompanying special rights (Schemes) (Slump Sales and the Schemes collectively constitute the Proposed Combination).

3. Keimed, along with its subsidiary companies, is engaged in the business of wholesale distribution of pharmaceutical products, healthcare and wellness products across India. Palepu Pharma Private Limited, Medihauxe International Private Limited, Shree Amman Pharma Private Limited and ShanBalaji Pharma Private Limited are engaged in the business of wholesale of pharmaceutical and medical goods in Tamil Nadu. Vardhman Pharma Distributors Private Limited is engaged in the business of wholesale of pharmaceutical and medical goods in Karnataka. Lucky Pharmaceuticals Private Limited, Neelkanth Drugs Private Limited and Lifeline Pharmaceutical Private Limited are engaged in the wholesale of pharmaceutical and medical goods in Delhi. Meher Distributors Private Limited and New Amar Agencies Private Limited are engaged in the business of wholesale of pharmaceutical and medical goods in Maharashtra. Medihauxe Pharma Private Limited is engaged in the business of wholesale of pharmaceutical and medical goods in Telangana, Andhra Pradesh and Kerala. Vasu Agencies Hyd Private

Limited and Vasu Vaccines & Speciality Drugs Private Limited are engaged in the business of wholesale of pharmaceutical and medical goods in Telangana and Andhra Pradesh. Vasu Pharma Distributors Hyd Private Limited and Venkatasai Agencies Hyd Private Limited are engaged in the business of wholesale of pharmaceutical and medical goods in Telangana. Dhruvi Pharma Private Limited is engaged in the business of wholesale of pharmaceutical and medical goods in Gujarat, Rajasthan and Madhya Pradesh. ATC Pharma Private Limited and Singla Medicos Pharma Private Limited are engaged in the business of wholesale of pharmaceutical and medical goods in Gujarat. Adeline Pharma Private Limited is engaged in the business of wholesale of pharmaceutical and medical goods in West Bengal and Odisha.

4. The Merging Parties (and their businesses) are currently jointly controlled by Keimed and their respective shareholders. Post the Proposed Combination, the Merging Parties will merge into Keimed and their businesses would be housed in wholly-owned subsidiaries of Keimed. As already noted above, the shareholders of each of the Merging Parties will become shareholders of Keimed, with each of them acquiring minority shareholding in Keimed with no accompanying special rights thus implying change in control over the businesses of Merging Parties from current joint control of Keimed and respective shareholders of each of the Merging Parties to sole control of Keimed.

5. The key aspect for examination from competition perspective in cases involving change in control from joint to sole or changes in degree or quality of control is the change in ability/incentive of the entity acquiring sole control resulting from lifting of restraining influence of other shareholders arising from their potentially different interests. It may also be noted that such potential differences in interests are more likely in the event of entities involved having separate presence in the related area(s) apart from the entity(ies) which is/are under joint control. Further, such potential differences would also depend upon various factors viz., inter-alia, extent of shareholding, nature of rights, overall presence of the entity etc.

6. The Commission noted that Keimed and the Merging Parties are primarily involved in wholesale and distribution of drugs in India while they also have presence in the segment of retail sale of specialty drugs and sale of medical devices such as medical equipment, surgical devices, implants etc. or consumables/products such as masks, syringes, gauze etc. Apart from the same, one of the subsidiaries of Keimed is also involved in sub-contracting manufacturing of pharmaceutical products to third parties and subsequent sale of such products. The Commission observed that for the reasons discussed in subsequent part of this Order, the Proposed Combination is not likely to cause any appreciable adverse effect on competition in India in any of the market(s) that could plausibly be impacted by the Proposed Combination and accordingly the issues relating to delineation of relevant market and assessment of impact of the Proposed Combination on change in degree or quality of control can be left open.

7. The Commission observed that the market share of Parties in the segment of wholesale and distribution of drugs in India is less than 5 percent which is insignificant to cause any change in competition dynamics regardless of the issue of change in degree or quality of control. Further, the presence of the Parties in other segments of retail sale of speciality drugs or sale of medical devices/consumables is insignificant as reflected in turnover derived them from these activities. Resultantly, the Proposed Combination is not likely to result in an appreciable adverse on competition in any horizontal or vertical relationships that can be discerned in relation thereto.

8. 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.

9. The order may be revoked if, at any time, the information provided by the Parties 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 Parties accordingly.