Megha Engineering & Infrastructures Limited — Combination C-2022/11/982

Notice under Section 6(2) of the Competition Act, 2002 given by Megha Engineering and Infrastructures Limited

CORAM:

Ms. Sangeeta Verma Acting Chairperson

Mr. Bhagwant Singh Bishnoi Member

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

1. On 2nd November 2022, the Competition Commission of India (‘Commission’) received a Notice under Section 6(2) of the Competition Act, 2002 (‘Act’) given by Megha Engineering and Infrastructures Limited (‘Acquirer’/MEIL). The Notice was filed pursuant to the execution of Letter of Intent dated 16th September 2022 between MEIL and IDBI Bank (which is the lead bank for the consortium of lenders) for a loan availed by Lanco Infratech Limited (LITL).

2. The Proposed Combination envisages the acquisition of 100% of equity shares and 100% of preference shares of Lanco Anpara Power Limited (‘Target’/LAPL) by the Acquirer, through MEIL Energy Private Limited (‘MEIL Energy’) from IDBI Trusteeship, Ramanagaram Enterprises Private Limited (REPL), LITL, and various other shareholders of LAPL.

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 16th November 2022, certain information and clarifications were sought from the Acquirer. The response was filed by the Acquirer on 23rd November 2022.

4. The Acquirer is a public limited company incorporated in India. It is primarily involved in undertaking engineering, procurement and construction (EPC), Build, Own, Operate, Transfer (BOOT) / Build, Own, Operate (BOO) projects in various sectors such as power, irrigation, drinking water, transportation, general infrastructure, and hydrocarbons. MEIL directly, as well as through its subsidiary SEPC Power Private Limited (SEPC), is involved in the generation of power. It has a current installed capacity of 575 MW for power generation in India, which consists of 50 MW of solar and 525 MW of thermal energy. It also undertakes transmission of power through its subsidiary, Western UP Power Transmission Company Limited (WUPPTCL).

5. It is submitted that MEIL Energy, wholly owned subsidiary of MEIL, will undertake the acquisition of the Target. It is incorporated in 2022 in India and does not have any business operations.

6. The Target belongs to the Lanco group of companies. It is a subsidiary of REPL and a second-level step-down subsidiary of LITL. It is engaged in thermal power generation by utilising coal as its source of energy. It houses two subcritical units of 600 MW each, located near Anpara in Uttar Pradesh. Therefore, the total installed capacity is 1,200 MW of power.

7. The Commission in its decisional practice has considered generation, distribution, and transmission of power as separate relevant product markets and has further segmented the market for generation of power based on the source of power generation, viz., renewable sources and non-renewable sources. The market for generation of power through non-renewable sources may be sub-segmented as thermal power generation (through coal) and other sources. In relation to the relevant geographic market, the Commission has observed that the relevant geographic market for power generation activities may be considered as the entire territory of India.

8. Considering the activities of the MEIL and the Target, there is a horizontal overlap in the market of power generation in India at a broader level. At a narrower level, this can be segmented into power generation in India through non-renewable and further through thermal source (using coal).

9. 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 relevant markets.

10. Based on the submission of the Acquirer, the Commission noted that, in the broad market for power generation in India and in all sub-segments thereof, the combined market shares of MEIL and the Target as well as the incremental market share is insignificant on the basis of installed capacity as well as actual production (in terms of both value and volume).

11. Further, it is submitted that the activities of MEIL and Target exhibit the following vertical overlaps: a) Generation of power in India by the Target (upstream market) and power transmission by WUPPTCL (downstream market); and b) Provision of EPC Solutions for power generation in India by MEIL (upstream market) and power generation in India by the Target (downstream market).

12. Based on the submission of the Acquirer, the Commission noted that the market share of Target in the market for power generation in India is insignificant. Further, the Acquirer group’s presence in the market for transmission of power in India and in the market for EPC solutions in the power sector is also minuscule. Based on the foregoing, it appears that the parties do not have the ability or incentive to cause foreclosure in any market in India.

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.

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