Shrilekha Business Consultancy, Shriram Financial Ventures, Shriram Capital, Shriram City Union Finance, Shriram Transport Finance Company, Shriram LI Holdings, Shriram GI Holdings and Shriram Investment Holdings. — Combination C-2022/06/946

Notice under Section 6(2) of the Competition Act, 2002 jointly given by Shrilekha Business Consultancy Private Limited, Shriram Financial Ventures (Chennai) Private Limited, Shriram Capital Limited, Shriram City Union Finance Limited, Shriram Transport Finance Company Limited, Shriram LI Holdings Private Limited, Shriram GI Holdings Private Limited and Shriram Investment Holdings 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 24 June 2022, the Competition Commission of India (Commission) received a Notice under Section 6(2) of the Competition Act, 2002 (Act), jointly given by Shrilekha Business Consultancy Private Limited (SBCPL), Shriram Financial Ventures (Chennai) Private Limited (SFVPL), Shriram Capital Limited (SCL), Shriram City Union Finance Limited (SCUF), Shriram Transport Finance Company Limited (STFC), Shriram LI Holdings Private Limited (SLIH), Shriram GI Holdings Private Limited (SGIH) and Shriram Investment Holdings Limited (SIHL) (collectively referred to as ‘Parties’). The Notice was filed pursuant to the approval of Board of Directors of the Parties of the Composite Scheme of Arrangement & Amalgamation (Scheme) on 13 December 2021.

2. The Parties forming part of the Scheme belong to The Shriram Group which is engaged in four different lines of businesses or verticals namely: (i) Financial Lending (ii) General Insurance (iii) Life Insurance and other (iv) Financial Services. The details of shareholding/activities of each of the Parties are as under: a. SBCPL is primarily held by Piramal Enterprises Limited (PEL) and Shriram Ownership Trust (SOT) which hold 74.95% and 25.05% shareholding. It is engaged in the business of holding strategic long-term investments, evaluating new opportunities and sourcing funds to meet the funding requirement of such new opportunities and to offer consultancy and related services, and such other allied business activities; b. SFVPL is held, inter alia, by SOT, Sanlam Emerging Markets (Mauritius) Limited (SEMM), SBCPL, and Shriwell Trust. SFVPL is engaged in the business of holding long term strategic investments; c. SCL is held, inter alia, by SBCPL, SFVPL and TPG India Investments II Inc., Mauritius (TPG) which hold around 20%, 71% and 9% of the paid-up equity share capital of SCL respectively.

It is engaged in the business of investment promotion and is registered as a Systemically Important Core Investment Company (CIC) with Reserve Bank of India. It is the promoter of the companies under its fold and focuses on tailoring strategies suited to the businesses carried on by these companies, facilitates investments from outside in them and in itself, infuses required capital and nurtures them to grow into developed business entities; d. SCUF is listed on the BSE and NSE. The Shriram Group companies forming part of promoter group of SCUF presently hold around 35% of the share capital of SCUF. It is engaged in the business of lending and is a deposit-accepting Non- Banking Financial Company (NBFC) registered with the RBI, specializing in retail finance; e. STFC is listed on the BSE and NSE. The Shriram Group companies forming part of promoter group of STFC presently hold around 26% of the share capital of STFC. It is a deposit taking asset financing NBFC registered with the RBI, carrying on business in the area of transport finance, particularly commercial vehicles and is stated to have a niche presence in financing pre-owned trucks and small truck owners; f. SLIH, SGIH and SIHL are held, inter alia, by SFVPL, SOT, TPG and PEL.

As stated, the main objective of SLIH, SGIH and SIHL is to undertake investment business/financial services.

3. The Proposed Combination involves the following series of inter-connected steps: Step I: Amalgamation of SBCPL with SCL; Step II: Demerger of the undertaking from SCL which is carrying on the business of financial services and the transfer and vesting thereof into SIHL; Step III: Demerger of those undertakings from SCL which are carrying on businesses of (a) life insurance; (b) general insurance and the transfer and vesting of the same into (a) SLIH; and (b) SGIH respectively; Step IV: Amalgamation of SCL (with its remaining undertaking and investments) with STFC; and Step V: Amalgamation of SCUF with STFC The scheme also involves apart from the amalgamation and demerger the following incidental steps: (a) The cancellation of the equity share capital of SFVPL held by SBCPL; (b) The cancellation of the preference share capital of SCL held by the holders of redeemable preference shares of SCL and the issue of redeemable preference shares of SIHL to the said shareholders; and (c) The cancellation of the existing equity share capital held by SCL in SIHL, SLIH and SGIH.

4. Based on the submissions of the Parties, horizontal overlaps were identified in the activities of the Parties at broader level in the area of non-banking financing and activity of distribution of insurance products.

5. As regards the non-banking financing, both STFC and SCUF are Deposit accepting NBFCs registered with Reserve Bank of India. However, their target customers / borrowers belong to different segments. While STFC is predominantly lending to the transportation segment and its allied businesses (which includes Commercial Vehicle (CV) financing, Working Capital Loan, Business Loan etc. to its existing customers), SCUF business model mainly involves MSME and Retail Financing like Auto Loan, Personal Loan, Gold Loan and Two-Wheeler Loan. Further, their presence in the overall non-banking financing and/or any of the aforesaid business segments is also insignificant to cause any change in competition dynamics.

6. As regards the activity of distribution of insurance products, it is noted that both STFC and SCUF are predominantly involved in procuring the business for its group insurance companies namely Shriram Life Insurance Company Limited and Shriram General Insurance Company Limited. Though, apart from above group insurance companies it is also procuring the business for other insurance companies, its presence is insignificant to cause any change in competition dynamics.

7. Further, it is observed that the Proposed Combination is primarily an intra-group restructuring involving the entities forming part of the Shriram Group. Apart from the companies belonging to the Shriram Group, the other companies involved in the Scheme are SEMM, TPG and PEL. As submitted, presently, while PEL has 74.95% equity stake in SBCPL, its effective holding in STFC post amalgamation will be around 8.35% and as clarified, PEL will be not have any right of representation to the Board or investor protection rights with STFC. Presently, SEMM, TPG and PEL have board representation rights and investor protection rights in SCL. As envisaged, on sanction and implementation of the Scheme, SCL as a Transferor Company shall stand dissolved without winding up. It has been submitted that as of now, it may be considered that the existing right of representation in the Board and investor protection rights available to PEL, SEMM and TPG in SCL will continue to be available in SLIH, SGIH and SIHL. Similar submissions have been made for certain special rights of SEMM in SFVPL. As regards the special rights available to PEL, SEMM and TPG in SCL and SBCPL, as submitted, the same will not be available in the merged entity i.e., STFC.

8. The Commission noted that as per the submissions of the Parties above, the shareholding/rights of the entities not belonging to the Shriram Group are to remain unchanged for respective businesses/entities while no rights will be available in the merged entity i.e., STFC. Accordingly, in absence of any significant change in the control over the Parties/businesses, the Proposed Combination is not likely to cause any significant change in competition dynamics.

9. 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.

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

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