Reliance Strategic Business Ventures Limited — Combination C-2022/06/939

Notice under Section 6(2) of the Competition Act, 2002 filed by Reliance Strategic Business Ventures 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 14.06.2022, the Competition Commission of India (Commission) received a notice under Section 6(2) of the Competition Act, 2002 (Act), filed by Reliance Strategic Business Ventures Limited (RSBVL/Acquirer) in relation to the proposed transaction involving an acquisition of 50.1% of the equity share capital of Sanmina-SCI India Private Limited (SCIPL/Target) by RSBVL (Proposed Combination).

2. The notice has been filed pursuant to the terms of a Share Subscription and Purchase Agreement (SSPA) dated 03.03.2022, executed between RSBVL, Sanmina Corporation, SCIPL, Sanmina-SCI Systems Singapore Pte. Ltd (Sanmina Singapore), and AET Holdings Limited (Sanmina AET); and a Shareholders‟ Agreement (SHA) dated 03.03.2022 executed between RSBVL, SCIPL, Sanmina Corporation, and Sanmina Singapore.

Combination Registration No. C-2022/06/939

3. It is submitted that, pursuant to the Proposed Combination, RSBVL and Sanmina Singapore will hold 50.1% and 49.9% of the equity share capital of SCIPL, respectively. Further, it is submitted that Sanmina-SCI Technology India Private Limited (STIPL) (a wholly owned subsidiary of SCIPL) is, inter alia, engaged in the Co-Developer Business, i.e., holding the SIPCOT Land as a lessee and acting as a co-developer of the SIPCOT Land and the buildings thereon. It is also submitted that, prior to closing of the Proposed Combination, but not before obtaining approval of the Commission, the business of STIPL (with the exception of the Co-Developer Business, which shall continue to vest with STIPL) will be transferred to a newly incorporated entity set up by Sanmina Corporation (or any of its subsidiaries or Sanmina Singapore) as a going concern on a „slump sale‟ basis. It is also mentioned that, with respect to STIPL, only the Co-Developer Business will form part of the scope of the Proposed Combination, (Hereinafter, RSBVL and SCIPL are collectively referred to as Parties. Sanmina Corporation, along with its subsidiaries Sanmina Singapore and AET Holdings Limited, are collectively referred to as Sanmina).

4. In terms of Regulation 14 of the Competition Commission of India (Procedure in regard to transaction of business relating to combinations) Regulations, 2011 (Combination Regulations), the Parties were required to provide certain information(s)/clarification(s) vide the Commission‟s letter dated 28.06.2022, inter alia, relating to the Proposed Combination; response to the same was received on 05.07.2022. Certain clarifications/ information(s) were also sought, in order to carry out the competition assessment of the Proposed Combination, responses to which were received on 08.07.2022, 20.07.2022 and 22.07.2022.

Parties to the Combination

5. RSBVL, a public unlisted company incorporated in India, is a subsidiary of Reliance Industries Limited (RIL). RIL is the ultimate holding company of the Reliance Group (RIL Group). RSBVL‟s principal activities are trading of goods, holding strategic investment interests in businesses, and providing business support services. It is stated that RIL Group‟s activities in India span sectors, including hydrocarbon exploration and production, petroleum refining and marketing, petrochemicals, retail, and digital services.

Combination Registration No. C-2022/06/939

SCIPL 6. SCIPL, a private limited company incorporated in India, is an indirect subsidiary of Sanmina Corporation, headquartered in California, USA. Sanmina1 is a global provider of integrated manufacturing solutions, components, products and repair, logistics, and after-market services. It provides its services to original equipment manufacturers (OEMs) primarily in the communications networks, computing and storage, medical, defence and aerospace, industrial and semiconductor, multi-media, automotive, and clean technology sectors.

7. In India, SCIPL is stated to be engaged in electronic manufacturing services (EMS), including transmission equipment, point of sale equipment, and other electronic equipment for OEMs in the communications networks, automotive, industrial & semiconductors, medical, defence and aerospace, multimedia, clean tech, and computing and storage sectors.

Identification of Overlaps and Relevant Markets

8. It is submitted that RSBVL, through its investment in Neolync Solutions Private Limited (NSPL) (along with its subsidiaries and associate companies, referred to as Neolync), is engaged in the provision of electronic manufacturing services (EMS) for consumer products, including mobile phones. Further, it is submitted that NSPL‟s associate entities, Neolync Tele Communications Pvt. Ltd (NTCPL) and United Telelinks Neolyncs Pvt. Ltd. (UTNPL), are engaged in EMS for consumer products, including mobile phones. It is also submitted that NTCPL is a new entrant in this segment and is yet to commence its business operations, and UTNPL gets a significant portion of its revenues from an RIL Group company.

9. Further, it is stated that SCIPL is also engaged in the provision of EMS in India for communications networks, automotive, semiconductors, medical, defence and aerospace, multimedia, clean tech and computing and storage sectors. SCIPL does not provide EMS for consumer products (including mobile phones).

1 As stated earlier, Sanmina Corporation, along with its subsidiaries Sanmina Singapore and AET Holdings Limited, are collectively referred to as Sanmina.

Combination Registration No. C-2022/06/939

10. Accordingly, although the EMS activities of RSBVL (through Neolync) and SCIPL caters to different end-use, there is no overlap between the Parties at a narrower level, and the business activities of the Parties may exhibit an overlap in the market for the provision of EMS in India.

11. It is submitted by the Parties that, for the purposes of the Proposed Combination, the relevant market should be defined as “the market for provision of electronic manufacturing services in India” (Relevant Market 1).

Vertical and Complementary Overlaps

12. With regard to vertical relationship, it is submitted that SCIPL is engaged in the business of providing EMS in India for a range of end-uses/sub segments, including to entities engaged in the telecommunications sector. On the other hand, the RIL Group (through its indirect subsidiary, RJIL) is engaged in the provision of, inter alia, telecommunication services. Accordingly, the EMS services provided by SCIPL for the telecommunications sector may be used by RJIL as an input in providing telecommunication services.

13. It is also submitted that the hardware provided by EMS providers cannot, on a standalone basis, be used as an input by telecom service providers. Such hardware needs to be layered with a software component, following which, it can be used as an input. Thus, there is no direct vertical link between the business activities of SCIPL and RJIL, as the EMS provided by SCIPL would only form a partial element of the input that is required by RJIL to provide its services. It is submitted by the Parties that RJIL has also placed certain purchase orders with SCIPL between November 2020 to October 2021. It is, however, clarified that these orders are yet to be fulfilled. However, in view of the nature of services provided by RJIL and SCIPL and the existing supply relationship between the two, there exists a vertical overlap between the Parties. At an upstream market level, SCIPL is engaged in the business of providing EMS in India, including for the communications sector, and at the downstream market, RJIL is, inter alia, engaged in the provision of telecommunications services in India.

Combination Registration No. C-2022/06/939

14. The Parties submitted that the relevant upstream and downstream markets for the Vertical Overlap may be defined as follows: (i) Upstream market for provision of EMS for communication sector in India (Upstream Market); and (ii) Downstream market for provision of mobile telephony/telecommunications services in India (Downstream Market).

15. The Commission decided to assess the Proposed Combination in the segments identified by the Parties. However, the exact delineation of the relevant market is being left open as the material available on record does not suggest that the Proposed Combination is likely to cause any competition concern in India.

Competitive Assessment

16. Based on the submissions, it is noted that the combined market shares of SCIPL and UTNPL are insignificant in Relevant Market 1 and there are players present such as Bharat FIH Limited (Bharat FIH), Flex Ltd. (Flextronics), and Dixon Technologies (India) Limited (Dixon), which have market shares of (10-15)%, (5-10)%, and (5-10)%, respectively.

17. The Parties have also submitted that not only did NTCPL not have any sales in FY 2021-22, its business operations are yet to formally start, and a significant portion of UTNPL‟s revenue in the previous financial year was from sales to Reliance Retail Limited, an entity belonging to the RIL Group. Accordingly, UTNPL should not be considered to be an active competitor in Relevant Market 1, since most of its services were used captively by RIL Group.

18. In relation to the vertical relationship, based on the submissions of the Parties, it is noted that SCIPL‟s market share in the Upstream Market is insignificant and there is a presence of other players such as Flextronics, Jabil, Foxconn, etc. Further, it is submitted that SCIPL does not command adequate market power to be able to foreclose inputs to the Downstream Market. It is also submitted that, in the Downstream Market, there are other players like Bharti Airtel [market share of (30-35)% (in terms of volume)] and Vodafone Idea [market share of (20-25)% (in terms of volume)] that impose competitive constraints on RJIL. In Combination Registration No. C-2022/06/939 view of the above, it is submitted by the Parties that neither RJIL nor SCIPL have the requisite market power to cause any market foreclosure.

19. Considering the facts on record, including the 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.

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

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

22. The Secretary is directed to communicate to the Parties accordingly.