Tata Steel Limited (TSL), Mumbai — Combination C-2018/07/581

1. On 02.07.2018, the Competition Commission of India (“Commission”) received a notice under Section 6(2) of the Competition Act, 2002 (“Act”) given by Tata Steel Limited (“TSL” or the “Acquirer”) in relation to the acquisition of up to 100 per cent of the total issued and paid up share capital of Bhushan Power and Steel Limited (“BPSL”), by TSL (“Proposed Combination”). […….]. Hereinafter, TSL and BPSL are collectively referred to as the “Parties”. The Acquirer also made certain additional submissions on 20.07.2018, 31.07.2018 and 06.08.2018.

2. It has also been submitted that BPSL is presently undergoing insolvency resolution proceedings initiated under the Insolvency and Bankruptcy Code, 2017 (IBC). The notice was filed pursuant to resolutions passed by the board of directors of TSL in meetings held on 18.12.2017 & 19.12.2017 and subsequent submission of a resolution plan by TSL on 08.02.2018.

3. TSL is a public limited company, stated to be engaged in integrated steel manufacturing operations, ranging from mining to steel-making and further downstream processing. The annual crude steel capacity across Indian operations of TSL is stated to be nearly 18.6 million ton per annum (“MTPA”)1. BPSL is also a public limited company and is similarly engaged in integrated steel manufacturing operations, including downstream processing of flat carbon steel products such as cold rolled sheets and coils, surface coated products, tubes and pipes and alloy based long steel products such as billets, rounds, round corner squares, bars and wire rods. BPSL’s current nameplate steel production capacity is stated to be 2.30 MTPA.

A. Horizontal Overlaps

4. It is noted from the information given in the notice that Parties primarily overlap in the manufacture and sale of various finished flat carbon steel products in India. Apart from these, the business operations of TSL and BPSL overlap in respect of alloy billets, sponge iron and pig iron. The Parties are also engaged in the business of various other steel products also, but based on the submissions of the Acquirer, the Commission notes that Parties do not have any product overlaps in these segments.

5. As already stated, the Parties overlap in the manufacture and sale of various finished flat carbon steel products in India. It is noted that there are various stages in the production process of flat carbon steel products i.e. hot rolling, cold rolling, etc. As per the information given by the Acquirer, the finished product may be sold at each of these stages or be utilized for further processing in the next stage. Based on such segmentation, the Parties overlap in respect of following finished flat carbon steel products (FCSPs):

i. Hot rolled coils and sheets (HR-CS) and plates (HR-P) (together, HR-CSP); ii. Cold rolled coils and sheets (CR-CS); iii. Surface coated products (SCP) (i.e. galvanized products (GP) and colour coated products (CCP); and iv. Flat steel tubes and pipes (T&P) (i.e. precision and non-precision T&Ps).

1 The Commission noted that TSL has recently acquired Bhushan Steel Limited (“BSL”) which was approved by the Commission vide order dated 25.04.2018 issued under Section 31(1) of the Act (Comb. Regn No. C-2018/03/562). Accordingly, for the purpose of competition assessment of the present case, the data related to TSL includes that of BSL.

is engaged in the business of foundry pig iron. As per the Acquirer, basic pig iron and foundry pig iron are distinct from each other in terms of their physical composition, characteristics, end use and demand in the market and therefore, do not constitute a part of the same market. If the contention of the Acquirer is accepted then TSL and BPSL do not overlap in the market for pig iron.

27. However, even if basic pig iron and foundry pig iron are considered to be in the same market, the Proposed Combination is not likely to result in any competition harm as the combined market share of the Parties in the product segment is [0-5] per cent, on the basis of domestic sales. Therefore, the exact delineation of the relevant market may be left open.

Sponge Iron 28. Sponge iron is a metallic product produced through direct reduction of iron ore in the solid state. Both the Parties are in the manufacture and sale of sponge iron in India; however, BPSL is stated to have limited presence in the market for sale of sponge iron since the majority portion of sponge iron produced by it is used for captive consumption. The combined market share of the Parties in this product segment, based on any of the above-mentioned parameters, was less than [0-10] per cent for FY 2017- 18.

Alloy Billets 29. It was noted that both TSL (through BSL) and BPSL manufacture and sell alloy billets. It has also been submitted that BPSL has sold billets in the domestic market that it cannot use for its own consumption. On the basis of data presented by the Acquirer, it is further noted that the Parties have limited presence in the domestic sales market for alloy billets.

30. In view of the foregoing, the Commission is of the view that horizontal overlaps resulting from the Proposed Combination are not likely to result in any appreciable adverse effect on competition in any of the segments, as discussed above.

B. Vertically related markets

31. As already stated, both the Parties are large integrated steel producers and are active across the value chain in the flat steel products. Further, the finished product at the end of each of the stage in the production process of flat carbon steel products i.e. hot rolling, cold rolling and coating, may be sold either in the open market or utilized for further processing in the next stage. Accordingly, following vertically related markets are identified for competition analysis: i. Upstream segment of hot metal/sponge iron and downstream segment of semi-finished slabs; ii. Upstream segment of semi-finished slabs and downstream segment of hot rolled products (HR products); iii. Upstream segment of HR products and downstream segment of (i) cold rolled products (CR products); and (ii) Tubes and Pipes (T&P); iv. Upstream segment of CR products and downstream segment of (i) surface coated products (SCP); and (ii) T&P; v. Upstream segment of galvanized products (GP) and downstream segment of colour-coated products (CCP);

32. However, for reasons already discussed above, each of the above-mentioned markets is characterized by presence of significant competitors. Therefore, the Commission is of the view that post combination, TSL would not have the ability to foreclose the market for other competitors.

33. In view of the foregoing, the Commission noted that the Proposed Combination does not give rise to any competition concerns regardless of the manner in which the relevant market is defined. Accordingly, the Commission decided that for the purpose of this decision, the exact delineation of relevant market for supply of steel products in India may be left open.

34. Considering facts on record, details provided in the notice given under sub-section (2) of Section 6 of the Act and assessment on the basis of factors stated in sub-section (4) of Section 20 of the Act, the Commission is of the opinion that the Proposed Combination is not likely to have an appreciable adverse effect on competition in India.

35. This order shall stand revoked if, at any time, the information provided by the Acquirer is found to be incorrect.

36. The information provided by the Acquirer is confidential at this stage, in terms of and subject to the provisions of Section 57 of the Act.

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

(Augustine Peter) (U. C. Nahta) (G. P. Mittal) Member Member Member (Sudhir Mital) Chairperson