Reliance Polyester Limited — Combination C-2022/09/973

Notice under Section 6(2) of the Competition Act, 2002, filed by Reliance Polyester 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 29th September, 2022, the Competition Commission of India (Commission) received a notice under Section 6(2) of the Competition Act, 2002 (Act), given by Reliance Polyester Limited (Acquirer) regarding its proposed acquisition of certain business undertakings of Shubhalakshmi Polyesters Limited (SPL) and Shubhlaxmi Polytex Limited (SPTex). In relation to the Proposed Combination, the Acquirer has entered into Business Transfer Agreements with each SPL and SPTex.

2. In terms of Regulations 14(3) of the Combination Regulations, the Commission, vide communication dated 11th October, 2022, sought certain information and clarifications regarding, inter alia, activities of the Parties, market presence, etc. The response to the same was submitted by the Acquirer on 13th October, 2022.

3. The Proposed Combination contemplates acquisition of the business undertakings of SPL and SPTex, pertaining to the manufacture of polyester products / yarn as a going concern on a slump sale basis for a lumpsum consideration.

4. The Acquirer is not engaged in any business activity at present. However, post-closing of the Proposed Transaction, it will primarily be engaged in the production and supply of certain petrochemical products such as polyester staple fibre (PSF), polyethylene terephthalate chips (Chips) as well as different types of polyester yarns. The Acquirer belongs to the RIL group (which is one of the producers of polyester fibre and polyester yarns in India). The RIL group is engaged in the following business activities either by itself or through its group entities in India / the rest of the world: (i) refining and marketing; (ii) petrochemicals; (iii) exploration and production of oil and gas; (iv) retail; (v) telecommunication and digital services; and (vi) media and entertainment.

5. SPL is engaged in the production and supply of, inter alia, the following polyester products in India: (i) PSF; (ii) partially oriented yarn (POY); (iii) drawn textured yarn / polyester textured yarn (DTY or PTY); (iv) fully drawn yarn (FDY); and (e) Chips. SPL also exports polyester products to over 35 countries including to the United States of America, Canada, Australia, Ethiopia, Peru, Chile, Colombia, Korea, Vietnam and Russia. SPTex is engaged in the production and supply of DTY in India. SPTex also exports DTY to other countries including to the United States of America, Canada, Australia, Ethiopia, Peru, Chile, Colombia, Korea, Vietnam and Russia. Both SPL and SPTex therefore belong to the Shubhalakshmi group. As on 31 March 2022, Shubhlaxmi Dyetex Private Limited, another entity belonging to Shubhalaxmi Group is stated to hold 74.02% and 96.99% shareholding in SPL and SPTex, respectively.

6. The Proposed Combination primarily concerns with the petrochemicals industry in India, specifically the products in the polyester value chain. The business activities of the parties are similar to each other in (a) polyester staple fibre (PSF); (b) partially oriented yarn (POY); (c) drawn textured yarn (DTY) / polyester textured yarn (PTY); (d) fully drawn yarn (FDY); and (e) polyethylene terephthalate chips (Chips). Based on the information provided in the notice, it is observed that the primary inputs for manufacturing all these horizontally overlapping products are purified terephthalic acid (PTA) and Mono ethylene glycol (MEG). While Shubhalaxmi Group is not engaged in manufacture of PTA and MEG, a substantial majority of the requirements for these inputs were met by Shubhalaxmi Group by purchasing the same from the Acquirer Group. Further, the Shubhalaxmi Group has also sourced a considerable portion of their requirement for Chips from the Acquirer Group. Thus, the activities of the parties also exhibit vertical overlap.

7. It is observed that the Acquirer Group has commendable presence in the upstream markets for manufacture and sale of PTA and MEG. The Shubhalaxmi Group, including the target assets, are not engaged in manufacture and/or supply of these products. Further, the market share of the target assets in the horizontally overlapping and/or the combined market share of the parties are not significant and accordingly, the incremental market shares, as a result of the Proposed Combination, are low. Furthermore, besides the parties to the Proposed Combination, there are several other players like Bombay Dyeing, Garden Silk, Indo Rama, Filatex, Bhilosa, JBF, Chiripal, and Wellknown, amongst others supplying all or some of these overlapping products. Therefore, the Proposed Combination is not likely to give rise to any competition concern.

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. Therefore, the Commission approves the Proposed Combination under Section 31(1) of the Act.

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

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

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