Shrem InvIT — Combination C-2022/04/925

Notice under Section 6(2) of the Competition Act, 2002 jointly given by Shrem InvIT and Dilip Buildcon Limited and its associates

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 April 2022, the Competition Commission of India (‘Commission’) received a Notice under Section 6(2) of the Competition Act, 2002 (‘Act’) given by Shrem InvIT. The Notice was filed pursuant to the execution of Securities Purchase Agreements (‘SPA’) and Shareholder’s Agreements for each of the road infrastructure projects on 3rd March 2022, inter alia, between and Dilip Buildcon Limited (‘DBL’), DBL Infra Assets Private Limited (‘DIAPL’), Shrem Financial Private Limited (acting in capacity of Investment Manager to Shrem InvIT) (‘IM’) and Commercial Arrangement Agreement dated 3rd March 2022 between DBL, DIAPL, Shrem Infrastructure Private Limited (‘Sponsor’), IM and Shrem Road Projects Private Limited (‘Project Manager’/‘PM’).

2. The Proposed Combination is envisaged as follows: Step 1: Acquisition of 100% of the equity in 10 Target SPVs by Shrem InvIT from DBL and its associates (‘DBL Group’) [Hereinafter, Shrem InvIT and DBL Group are collectively referred to as ‘Parties’]. The 10 Target SPVs are: (i) DBL Byrapura Challakere Highways Private Limited; (ii) DBL Gorhar Khairatunda Highways Private Limited; (iii) DBL Anandapuram Anakapalli Highways Private Limited; (iv) DBL Bellary Byrapura Highways Private Limited; (v) DBL Sangli Borgaon Highways Private Limited; (vi) DBL Chandikhole Bhadrak Highways Private Limited; (vii) DBL Bangalore Nidagatta Highways Private Limited; (viii) DBL Nidagatta Mysore Highways Private Limited; (ix) DBL Rewa Sidhi Highways Private Limited; and (x) Pathrapali Kathgora Highways Private Limited.

Step 2: In consideration of the above, DBL Group envisages acquiring about 27% of the units of Shrem InvIT, along with certain rights in the Investment Manager and/or the Project Manager of Shrem InvIT.

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 20th May 2022, Parties were required to remove defects in the Notice and furnish certain information and clarifications. The response was filed on 27th May 2022. Subsequently, another letter dated 8th June 2022 was issued to the Parties and the response was filed on 15th June 2022. As this response was incomplete, Parties were asked to provide complete information vide letter dated 21st June 2022. Subsequently, response from the Parties was received on 1st July 2022 after seeking extension. In response to the 8th June 2022 communication, DBL and its associates also became notifying parties by furnishing relevant documents.

4. The Parties have also provided certain additional information by way of voluntary submission dated 6th June 2022.

5. Shrem InvIT is a trust registered under the Indian Trusts Act, 1882 and with the Securities and Exchange Board of India (‘SEBI’) under SEBI (Infrastructure Investment Trusts) Regulations, 2014. Shrem InvIT invests in completed and revenue-generating road assets by acquiring economic interest/equity in the targets. It also provides concessionaire services to the respective government authorities through its SPVs. The existing portfolio of Shrem InvIT includes 24 road projects spread across the states of Gujarat, Maharashtra, Uttar Pradesh, Karnataka and Madhya Pradesh.

6. The Sponsor is part of Shrem Group and invests in infrastructure assets like roads, hospitals, etc. It is the largest unitholder in Shrem InvIT.

7. The Investment Manager provides investment management services exclusively to Shrem InvIT which includes, inter alia, management of funds and distribution to unitholders.

8. DBL, along with its subsidiaries, associates and affiliates, is engaged in the construction works of roads and highways on Engineering, Procurement and Construction (‘EPC’) contract basis, obtained through open competitive bidding process from government authorities. It provides concessioner services to government authorities and carries out Operation & Maintenance (‘O&M’) once construction work is completed till the end of the concession period.

9. The Target SPVs are undertaking road projects in the states of Karnataka, Jharkhand, Andhra Pradesh, Maharashtra, Odisha, Madhya Pradesh and Chhattisgarh. Each Target SPV is formed for the purpose of developing a specific road project (as mentioned in its name), and once this object is achieved, the SPV will be dissolved. During the concession period, these SPVs are responsible for design, development, operation and maintenance of the road projects.

10. It is submitted in the Notice that the 24 existing road projects of Shrem InvIT and 10 road projects of Target SPVs do not exhibit any overlaps. As all these road projects and concession agreements are unique, the relevant geographic market may be considered as the combination of a point of origin and point of destination. In this regard the Commission noted that each individual SPV operates in its confined geographical area catering to a different set of users/commuters and operating in a distinct market. Accordingly, there is no horizontal overlap between these road projects.

11. Further, based on the submission of the Parties, the business activities of Shrem InvIT and DBL Group exhibit the following overlaps: (i) horizontal overlap in road infrastructure sector and provision of concessioner services; (ii) potential vertical overlap in the provision of O&M services by DBL Group (upstream market) and provision of concessioner services by Shrem InvIT (downstream market); and (iii) potential vertical overlap in the development of road infrastructure by DBL Group (upstream market) and investment in completed and revenue generating road assets for provision of concessioner services by Shrem InvIT (downstream market).

12. 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.

13. In the instant case, based on the submissions of the Parties, it is observed that the overall presence of Shrem InvIT in the segment for road infrastructure sector/provision of concessioner services in India is minimal and this segment is highly fragmented. Accordingly, the Proposed Combination is not likely to cause any change in competition dynamics in any plausible relevant market, and the Parties are not likely to have any ability or incentive to foreclose competition in any market.

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 Secretary is directed to communicate to the Parties accordingly.