Salic International Investment Company (SIIC), Riyadh, Saudi Arabia — Combination C-2023/01/996

Notice under Section 6(2) of the Competition Act, 2002 jointly given by SALIC International Investment Company and LT Foods Limited

CORAM: Ms. Sangeeta Verma Acting Chairperson

Mr. Bhagwant Singh Bishnoi Member

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

1. On 03 January 2023, the Competition Commission of India (‘Commission’) received a Notice under Section 6(2) of the Competition Act, 2002 (‘Act’), jointly given by SALIC International Investment Company (SIIC), a wholly owned subsidiary of Saudi Agricultural and Livestock Investment Company (SALIC) and LT Foods Limited (LT Foods) (collectively ‘Parties’).

2. As per the Proposed Combination, SIIC proposes to acquire certain equity share capital of LT Foods along with the right to appoint one nominee and one observer on the board of LT Foods along with certain affirmative rights and LT Foods proposes to acquire certain equity share capital of Daawat Foods Limited (DFL), a subsidiary of LT Foods. The details of share capital proposed to be acquirer and steps constituting the proposed combination are given hereunder:

Step 1: Subscription by SIIC of 7.89 percent of the total issued, subscribed and paid-up share capital of LT Foods by way of a preferential allotment;

Step 2: Acquisition by LT Foods of 29.52 percent of the issued and paid up voting share capital of DFL from United Farmers Investment Company (UFIC), a wholly owned subsidiary of SALIC;

Step 3: Acquisition of equity shares of LT Foods by SIIC from certain promoter shareholders, amounting to 1.33 percent of the total issued, subscribed and paid-up share capital of LT Foods such that SIIC would hold 9.22 percent of the issued and paid up share capital of LT Foods (on a fully diluted basis) after the completion of Step 3; and Step 4: Subsequent to the completion of Steps 1 to 3 above, SIIC (likely through its wholly owned subsidiary) proposes to acquire an additional 10 percent shareholding of LT Foods through secondary, on-market purchases.

(Steps 1 to 4 collectively constitute ‘Proposed Combination’).

Pursuant to the Proposed Combination, SIIC will hold up to 20 percent of the equity share capital of LT Foods and LT Foods will hold 100 percent of the equity share capital of DFL.

3. The following transaction documents (collectively ‘Transaction Documents’) have been executed in relation to the Proposed Combination: (i) Share Subscription Agreement, Share Purchase Agreement and Shareholders’ Agreement of LT Foods each dated 10 November 2022 entered into, inter alia, between SIIC and LT Foods;

(ii) Share Purchase Agreement and Second Amendment Agreement to the Shareholders Agreement of DFL; and (iii) Supply Agreement dated 10 November 2022 entered into between SALIC, SIIC and LT Foods (‘Supply Agreement’).

4. SIIC is an unlisted limited liability company based in Riyadh, Kingdom of Saudi Arabia which is fully owned and controlled by SALIC. SALIC established by Royal Decree as a Saudi company owned by the Public Investment Fund (PIF). SALIC is an investment company with holdings in various international companies specialised in the fields of agriculture and trading of food commodities. Its agri-business business is focused on farming and procurement as well as importing commodities into the Kingdom of Saudi Arabia. As stated, SALIC is PIF’s only investment in the agri-commodity sector. Neither SALIC nor SIIC is directly present in India. SALIC, indirectly through SIIC, is present in India through its investment in Olam Agri Holdings Pte. Ltd. (Olam Agri) and DFL (through UFIC).

5. The group of LT Foods includes LT Foods itself and its downstream affiliates. The business of LT Foods (including DFL) comprises of basmati, non-basmati and other specialty rice, and rice food products etc. The company portfolio relating to rice and rice food products includes a range of brands including flagship brands viz., ‘Daawat’ and ‘Royal’ and regional brands such ‘Heritage’, ‘Rozana’, ‘Devaaya’ etc. As stated, the group of LT Foods are also present in the organic food and ingredients segment, easy to cook rice-based/rice allied food etc.

6. For the purpose of competition assessment, the Commission noted that the only relevant presence of SALIC in India is its investment in Olam Agri given that the shareholding of SALIC in DFL is being acquired by LT Foods as a part of the Proposed Combination. Accordingly, considering the business activities of LT Foods (including LT Foods and its downstream affiliates) and Olam Agri, the overlaps are identified in the following areas/segments:

i. Distribution and sale of basmati rice in India; ii. Distribution and sale of non-basmati rice in India; iii. Production and sale of Oil seeds in India; and iv. Wholesale trading of Edible oils in India.

7. As regards basmati rice, the Commission observed that basmati rice can be segmented in terms of various varieties of basmati rice and also considering the aspect of branded/non-branded basmati rice. However, the Commission, for the reasons detailed hereunder, is of the view that the Proposed Combination is not likely to cause any appreciable adverse effect on competition regardless of the manner in which market is segmented and accordingly the issue of exact delineation of relevant market can be left open.

8. The Commission observed that while LT Foods along with its affiliates has a market share in the range of [10-15] percent in the market for basmati rice in India and [25-30] percent in the market for branded basmati rice in India, the presence of Olam Agri is miniscule as reflected in the market share of less than 1 percent in both the basmati rice segment and branded basmati rice sub-segment in India. Further, the segment/sub-segment is led by KRBL Limited (whose portfolio include brand ‘India Gate’) and comprises of other significant competitors such as Adani Wilmar Limited (whose portfolio includes brands such as ‘Fortune’ and ‘Kohinoor’).

9. The Commission also noted that as per the Supply Agreement, SIIC would be allowed to purchase basmati rice from LT Foods and supply it for consumption to countries such as Kingdom of Saudi Arabia and the countries in the middle east and North Africa region. The Commission, in this regard observed that, considering the statistics for FY 2021-22 as submitted, the basmati rice exports amount to around 3.95 million tonnes out of aggregate estimated production of 6.40 million tonnes thus implying that around 62 percent of rice produced in India is exported. The Commission observed that quantity that LT Foods may be required to supply pursuant to the Supply Agreement is not very significant seen in context of size of India basmati rice market or basmati rice export market. Further, the Commission observed, considering the clarifications given by the Acquirers, that LT Foods’ supply in the Indian market will not be hampered as a consequence of the Supply Agreement.

10. Based on the aforesaid, the Commission is of the opinion that the Proposed Combination is not likely to result in any appreciable adverse effect on competition in any of the plausible relevant market(s) relating to basmati rice in India.

11. As regards non-basmati rice, the Commission observed that like the basmati rice, this segment can also be sub-segmented in terms of varieties or on the aspect of branding. However, the Commission, for the reasons detailed hereunder, is of the view that the Proposed Combination is not likely to cause any appreciable adverse effect on competition regardless of the manner in which market is segmented and accordingly the issue of exact delineation of relevant market can be left open.

12. The market for distribution and sale of non-basmati rice in India appears to be fragmented. The presence of both LT Foods and Olam Agri is miniscule in terms of production volumes seen relative to estimated total production of non-basmati rice in India in FY 2021-22 which stood at around 122 million tonnes. Resultingly, the overall combined share and increment resulting from the Proposed Combination are insignificant to have any impact on competition dynamics regardless of the way in which the relevant market is defined.

13. As regards oil seeds, the Commission noted that while LT Foods entities produce soyabean, sesame and flaxseed oil seeds, Olam Agri only produces sesame oil seeds. As regards edible oils, the Commission noted that while Olam Agri deals in palm, soyabean and sunflower oil, LT Foods entities deal in organic varieties of sesame, flaxseed and soyabean oil. The Commission observed that the presence of LT Foods entities in both these segments of oil seeds and edible oils as reflected in its actual turnover derived therefrom is miniscule and consequently the Proposed Combination is not likely to have any impact on competition dynamics in these segments or any plausible relevant sub-segments. Accordingly, the issue of delineation of relevant market(s) in relation to these product segments can be left open.

14. 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.

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

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

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