OFB Tech Pvt Ltd. — Combination C-2022/03/915

COMPETITION COMMISSION OF INDIA 17th May 2022 Notice under Section 6(2) of the Competition Act, 2002 jointly given by OFB Tech Private Limited, Sangam E-Com Limited and Santosh Hybrid Seeds Company Private Limited CORAM: Mr. Ashok Kumar Gupta Chairperson Ms. Sangeeta Verma Member Mr. Bhagwant Singh Bishnoi Member Order under Section 31(1) of the Competition Act, 2002 1. On 24th March 2022, the Competition Commission of India (Commission) received a notice (Notice) under Section 6(2) of the Competition Act, 2002 (Act), given by OFB Tech Private Limited (Acquirer/OFB Tech). The Notice was given pursuant to execution of the Share Purchase Agreement and Shareholders Agreement, inter alia, between the Acquirer and SMW Ispat Private Limited (Target/SMW Ispat) on 15th March 2022. 2. The Commission, vide its communication dated 6th April 2022 and 20th April 2022 (20th April Communication), issued under Regulation 14(3) of the Competition Commission of India (Procedure in regard to transaction of business relating to combinations) Regulations, 2011, required the notifying party(ies) to remove defects in the Notice and furnish certain information relevant for the purpose of assessment of the Proposed Combination. Notifying party(ies) furnished their response vide submissions dated 11th April 2022 and 25th April 2022. Acquirers for inter-connected transaction(s) were not the notifying parties to the Notice. In response to the 20th April Communication, acquirers for inter-connected transaction(s), viz., Sangam E-Com Limited (Sangam) and Santosh Hybrid Seeds Co. Private Limited (Santosh), also became notifying parties by furnishing relevant documents.

3. The Proposed Combination envisages acquisition of 97.77% of the share capital (on a fully diluted basis) of the Target from its shareholders by acquiring 93.50% of the equity shares capital and 100% of the compulsorily convertible preference shares (CCPS) of the Target. The Proposed Combination envisages that Sangam and Santosh, the current shareholders of the Target, will purchase non-convertible redeemable preference shares (NCRPS) of the Target, presently held by a bank, and subsequently convert the said NCRPS into CCPS. Further, the Target and the Acquirer will enter into an inter-corporate loan agreement to repay certain debts of the Target. 4. It has been submitted that the Acquirer is engaged in the business of wholesale trading of bulk raw materials of different kinds, including steel, non-ferrous metals, industrial chemicals and petroleum derivatives, and agri-commodities to facilitate transactions between business through its online or offline channels. Subsidiaries/affiliates of the Acquirer are, inter alia, engaged in the sale of sponge iron and MS billets.

5. The Target is engaged in the business of manufacturing of mild steel (MS) TMT bars and MS billets. The Target sells MS TMT bars under the brand name Sangam. It carries out manufacturing process in a single plant set up in Wardha. The Target does not have any subsidiary or affiliate. 6. It has been submitted that none of the shareholders of the Acquirer, having shareholding of 10% or more or rights or advantages of commercial nature not available to an ordinary shareholder or board nomination/observer rights in the Acquirer, are engaged either directly or through their affiliates in any overlapping activities with those of the Target. 7. It has been submitted that the activities of the Acquirer and its subsidiaries/affiliates vis- à-vis the Target exhibit overlap with regard to sponge iron, MS billets, and MS TMT bars. It has been submitted that the Target can potentially purchase MS billets from subsidiaries/affiliates of the Acquirer. However, the Target does not have any need for the same as it itself produces MS billets for captive consumption for manufacturing MS TMT bars. MS billets produced by the Target are largely consumed captively to produce MS TMT bars for sale in the market.

The quantity of MS billets not consumed captively is sold in the market. A subsidiary of the Acquirer is engaged in manufacturing of angle, channel, and beams, which are manufactured from MS billets. In view of the limited market-facing activity of the Target relating to MS billets and limited market presence of the parties in the relevant segments, overlaps between the activities of the parties relating to MS billets are not likely to raise any competition concern. Sponge iron manufacturing plant of the Target has not been in operation for past few years. Sponge iron required for producing MS billets and MS TMT bars is procured by the Target from the market. The Acquirer, through its subsidiaries, is engaged in the sale of sponge iron. In view of the limited presence of the parties in the relevant segments, overlaps between the activities of the Acquirer and Target relating to sponge are not likely to raise any competition concerns. Target is engaged in the manufacturing of MS TMT bars. The Acquirer, through its subsidiaries/affiliates, is engaged in the sales of MS TMT bars and engineering construction and contract work related to installation of plants and other building structure.

The market presence of parties, including subsidiaries and affiliates, in respect of MS TMT bars is not significant. Further, the segment of manufacturing of MS TMT bars is characterised by the presence of other players, such as TATA, JSW, SAIL, Sugna, and Kamdhenu. 8. Considering the facts on record, including details provided in the Notice given under Section 6(2) of the Act and 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 in any of the relevant market(s), and therefore, the Commission hereby approves the same under Section 31(1) of the Act.

9. This order may be revoked if, at any time, the information provided by the notifying parties is found to be incorrect.

10. The information provided by the notifying parties is confidential at this stage in terms of and subject to the provisions of Section 57 of the Act.

11. The Secretary is directed to communicate to the notifying parties accordingly.