Umang Commercial Company Private Limited and Aditya Marketing and Manufacturing Private Limited. — Combination C-2022/07/952

Notice under Section 6(2) of the Competition Act, 2002 jointly filed by Umang Commercial Company Private Limited and Aditya Marketing and Manufacturing Private 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 11.07.2022, the Competition Commission of India (Commission) received a notice under sub-section (2) of Section 6 of the Competition Act, 2002 (Act), jointly filed by Umang Commercial Company Private Limited (Umang/Acquirer) and Aditya Marketing & Manufacturing Private Limited (AM/Target). [Hereinafter, Acquirer and the Target are collectively referred to as the Parties].

Combination Registration No. C-2022/07/952

2. The notice has been filed pursuant to the Scheme of Amalgamation under Sections 230 and 232 of the Companies Act, 2013 (Scheme), sanctioned by the National Company Law Tribunal, Kolkata bench, vide its order dated 28.06.2021.

3. The proposed combination was earlier notified on 10.12.2021 (Combination Registration No. C-2021/12/888). During scrutiny of the notice, it was found that there were several information gaps and deficiencies. Accordingly, a defect letter was issued under Regulation 14 of the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (Combination Regulations) on 28.12.2021, the response to which was received on 04.01.2022 and 24.01.2022. Upon perusal of the notice and the responses received, it was observed that various deficiencies continued to persist. Thus, on account of the information gaps, the Commission invalidated the notice in terms of Regulation 14 (2A) of the Combination Regulations on 11.01.2022 and directed the parties file a fresh notice.

Proposed Combination

4. The proposed combination involves merger of the Target into the Acquirer in accordance with the Scheme. As a result of the merger and in terms of the Scheme, the shares held by the Target in 15 entities1 will get vested in the Acquirer. Further, on account of the aforesaid vesting of shares, the Acquirer Group, will acquire control over a total of 5 entities which as on date are under the control of BKB Family (defined below), namely, Padmavati Investment Private Limited (Padmavati), Pilani Investment and Industries Corporation Limited (Pilani), Century Textile and Industries Limited (Century Textile), Ganesh Tubes and Services Private Limited (Ganesh Tubes) and Century Enka Limited (Century Enka). (Proposed Combination).

1 The shares held by Target in Pilani, Padmavati, Century Textile, Ganesh Tubes, HGI Industries Limited (HGI), UltraTech Cement Limited (UltraTech), Kesoram Industries Limited (KIL), Birla Tyres Limited (Birla Tyre), Kesoram Textile Mills Limited (KTML), Vidula Chemicals and Manufacturing Limited (Vidula), Jayshree Tea & Industries Limited (Jayshree), Bizari Veneer & Saw Mills Limited (Bizari Veneer), Manav Investment and Trading Company Limited (Manav), Essel Mining & Industries Limited (Essel Mining) and Mangalam Cement Limited (MCL).

Combination Registration No. C-2022/07/952

5. In terms of Regulation 14 of Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (Combination Regulations), the Commission, vide communication dated 03.08.2022, sought certain information(s)/clarification(s), inter alia, relating to the activities of the Parties; a partial response to the same was received on 10.08.2022. Further, the complete response was received on 16.08.2022.

Description of Parties

6. Acquirer: The Acquirer is an investment company and belongs to the Aditya Birla Group of companies. It holds shareholding in various entities on behalf of the Kumar Mangalam Birla and/or his family (KMB Family). The Acquirer operates only in India. It is registered with the Reserve Bank of India (RBI) as a Non-banking Financial Company (NBFC).

7. Aditya Birla Group: It is stated in the notice that Aditya Birla Group is not a legal entity and the group definition test prescribed under the Act is not applicable to it. Aditya Birla group is an expression created and used after the larger Birla Family re-organisation/arrangement, to represent companies and other entities, including joint venture companies, in which KMB Family hold(s) directly or indirectly at least 20% of the voting rights and are allowed to use Aditya Birla Logo; and includes entities which have been traditionally controlled and/or managed by KMB Family, and/or combination thereof. Aditya Birla Group is an Indian multinational conglomerate having businesses in various industry sectors including textiles, garments, chemicals, cement, metals and mining, apparels, life insurance, financial services, etc.

8. Target: The Target is an investment company and belongs to the B.K. Birla Group of companies. It holds shareholding in various entities on behalf of late Mr. Basant Kumar Birla and his family (BKB Family). The Target operates only in India. It is registered

Combination Registration No. C-2022/07/952 with the RBI as a NBFC. The B.K. Birla Group is a diversified group with presence in various industry sectors including textiles, cement, nylon tyre cord fabric, tea, tyres, etc.

9. It is stated in the notice that the Acquirer group holds non-controlling shareholding in various entities belonging to the BKB Family and whose shareholding is held by the Target. Similarly, the Target, which is currently under the control of the BKB Family, also holds non-controlling shareholding in entities which belong to the Acquirer group. However, pursuant to a family understanding within the larger Birla family, the BKB Family and KMB Family have been distinct family groups operating in various sectors though independent companies. Further, the control of such companies has historically been with the respective families regardless of the shareholding (if any) of either family groups in each other‟s companies. This position has continued even after the demise of Mr. Basant Kumar Birla.

Identification and Assessment of Horizontal Overlaps

10. It is submitted that the horizontal overlaps between the affiliates of Acquirer Group and the affiliates of the Target, Padmavati, Pilani, Century Textile, Century Enka and Ganesh Tubes are in following products/ services: A. Horizontal Overlap I: Man Made Fibre (MMF) and Cotton and, at individual product level, Viscose Filament Yarn (VFY) B. Horizontal Overlap II: Sodium Sulphate C. Horizontal Overlap III: Sulphuric Acid D. Horizontal Overlap IV: Carbon Disulphide E. Horizontal Overlap V: Grey Cement F. Horizontal Overlap VI: Cotton Textile

11. The Commission decided to assess the Proposed Combination in relation to the relevant market(s)/segment(s) as identified with regard to Horizontal Overlaps by the Parties in the notice. The Commission, however, decided to leave the exact delineation of the Combination Registration No. C-2022/07/952 relevant market as open, due to the reasons enumerated in the ensuing paragraphs of this order.

A. Horizontal Overlap I: MMF and Cotton and, at individual product level, VFY

12. It is submitted that Grasim Industries Limited (GIL), an affiliate of KMB Family, manufactures and sells Viscose Staple Fibre (VSF) and Viscose Filament Yarn (VFY) and Kesoram Industries Limited (KIL), an affiliate of the Target, manufactures and sells VFY; Century Textile, an affiliate of the Target, manufactures and sells Cotton Yarn, Cotton Blended Yarn and Modal/Excel/Linen/Polyester Yarns; and Century Enka, an affiliate of the Target, manufactures and sells Nylon Filament Yarn (NFY).

13. The Parties have identified the following relevant markets in relation to Horizontal Overlap I: (i) „Market for manufacture and sale of MMF and cotton in India‟ at a broad level (Relevant Market for MMF and Cotton); and (ii) „Market for manufacture and sale of VFY in India‟ at a narrower level (Narrow Relevant Market for VFY)2. The Commission decided to assess the Horizontal Overlap I in the identified relevant markets; however the issue of the exact delineation of the relevant market is being left open.

14. Based on the information provided, it is noted that the combined market share of the parties in the Relevant Market for MMF and Cotton is in the range of [0-5] % in terms of volume with a miniscule increment and in the Narrow Relevant Market for VFY is in the range of [50-55]% with an increment of [10-15]% in terms of volume. Further, the Parties have also submitted that there are no other domestic manufacturers except GIL and KIL in the Narrow Relevant Market for VFY and that the rest of the competition is only from imports by players such as Jilin Chemical Fiber Group Co., Ltd. (Jilin), Xinxiang Bailu Investment Group Co., Ltd. (Bailu) and Yibin Grace Co., Ltd. (Yibin). Given the high market shares of the Parties in the Narrow Relevant Market for VFY and 2 In relation to the Narrow Relevant Market for VFY, the Parties have submitted that they do not agree to a narrow definition of the Narrow Relevant Market for VFY but have provided the market share on a without prejudice basis and without conceding to a narrower definition of the relevant market.

Combination Registration No. C-2022/07/952 the merger of only two existing domestic players in the said relevant market, the Acquirer was required to provide certain clarification/ information(s) in relation to the same.

B. Horizontal Overlap II, III and IV – Sodium Sulphate / Sulphuric Acid / Carbon Disulphide

15. It is stated in the notice that GIL, an affiliate of KMB Family, and KIL, an affiliate of the Target, are engaged in the manufacture and sale of both Sodium Sulphate and Carbon Disulphide. Further, GIL, Hindalco Industries Limited (HIL) and Tanfac Industries Limited (TIL) (affiliates of KMB Family) and KIL, an affiliate of the Target are engaged in the manufacture and sale of Sulphuric Acid. It is stated that TIL has been divested on 11.03.2022 to an unrelated third party and is no longer part of the KMB Family/Aditya Birla group. To that extent, no overlap remains between KIL and TIL.

16. The Parties have submitted that the relevant market for these overlaps may be defined as the “Market for the manufacture and sale of Sodium Sulphate in India” (Relevant Market for Sodium Sulphate), “Market for the manufacture and sale of Sulphuric Acid in India” (Relevant Market for Sulphuric Acid) and “Market for the manufacture and sale of Carbon Disulphide in India” (Relevant Market for Carbon Disulphide).

17. Based on the submissions of the Parties, it is noted that the combined market share of the Parties in the Relevant Market for Sodium Sulphate, Relevant Market for Sulphuric Acid and Relevant Market for Carbon Disulphide in India is in the range of [25-30] %, [0- 5]% and [5-10]%, respectively, and there is miniscule increment in market share in terms of value in each of these markets. Further, it is stated by the Parties that GIL and KIL primarily manufacture Sulphuric Acid and Carbon Disulphide for captive consumption and only the surplus quantity, post captive consumption is sold on an ex-works basis. Moreover, there are other players such as Prakash Chemicals International Private Limited, Atul Limited, Innova Corporate (India), and Nilkanth Organics Private Limited, in the Relevant Market for Sodium Sulphate; Trident Limited, Sterlite Copper

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Limited, Paradeep Phosphates Limited, Gujarat State Fertilizer & Chemicals Limited, Hindustan Zinc Limited, and Coromandel International Ltd. in the Relevant Market for Sulphuric Acid; and Indo Baijin Chemical Private Limited, M.K. Intermediates, UPL Limited, Hridaan Pharma Chem, and Alpha Chemika in the Relevant Market for Carbon Disulphide.

C. Horizontal Overlap V- Grey Cement

18. It is stated in the notice that the activities of Ultratech, an affiliate of the KMB Family, and KIL and MCL, affiliates of the Target, have horizontal overlap in the manufacture and sale of different types of Grey Cement. Accordingly, the relevant product market may be defined as “the Market for Manufacture and Sale of Grey Cement”. Further, it is stated that, on one hand, UltraTech has cement manufacturing facilities in the States of: (i) Andhra Pradesh; (ii) Bihar; (iii) Chhattisgarh; (iv) Gujarat; (v) Haryana; (vi) Himachal Pradesh; (vii) Karnataka; (viii) Madhya Pradesh; (ix) Maharashtra; (x) Odisha; (xi) Punjab; (xii) Rajasthan; (xiii) Tamil Nadu; (xiv) Western Uttar Pradesh; (xv) Eastern Uttar Pradesh; (xvi) Uttarakhand; and (xvii) West Bengal. On the other hand, MCL has cement manufacturing plants located in: (i) Western Uttar Pradesh; and (ii) Rajasthan, and KIL has cement plants in: (i) Telangana; and (ii) Karnataka. Thus, while MCL and UltraTech have overlaps (in terms of manufacturing facilities) in the States of: (i) Rajasthan; and (ii) Western Uttar Pradesh; KIL and UltraTech have overlaps (in terms of manufacturing facilities) in the state of Karnataka. The Parties have submitted that in line with the past precedents of the Commission in relation to grey cement, the relevant geographic market has been defined on the basis of the „Elzinga-Hogarty‟ Test (EH Test).

19. The Parties have identified three relevant geographic markets based on the EH Test and LIFO – LOFI threshold assessments at 25% considering the Grey Cement production and dispatch data. The relevant market when Rajasthan is considered as the base state has been defined as “Market for manufacture and sale of Grey Cement in Rajasthan, Western Uttar Pradesh and Haryana” (Rajasthan Relevant Market); when Western

Combination Registration No. C-2022/07/952

Uttar Pradesh is considered as the base state the relevant market has been defined as “Market for manufacture and sale of Grey Cement in Western Uttar Pradesh, Rajasthan and Haryana” (Western Uttar Pradesh Relevant Market); and when Karnataka is considered as the base state the relevant market has been defined as “Market for manufacture and sale of Grey Cement in Karnataka and Maharashtra” (Karnataka Relevant Market). Further, the Parties have also provided details of sales in the market for the manufacture and sale of Grey Cement segmented into trade and non-trade on a statewise basis.

20. Based on the submissions of the parties, it is noted that the combined market share of the parties on the basis of installed capacity is in the range of [35-40]% in Karnataka Relevant Market with an incremental share of [5-10]%. Further, the combined market share of the parties in both Western Uttar Pradesh Relevant Market and Rajasthan Relevant Market is in the range of [30-35]% with an incremental share of [0-5]%. In order to carry out competition assessment of the market realities, actual production and sales figures of the parties as well as their competitors are required; however, in absence of the same, the Acquirer was required to provide certain clarification/ information(s).

D. Horizontal Overlap VI - Cotton Textile

21. The Parties have submitted that both GIL, an affiliate of the KMB family, and Century Textile, an affiliate of the Target, are engaged in the manufacture and sale of cotton textile in India. Therefore, the relevant market may be defined as the: “Market for the Manufacture and Sale of Cotton Textile in India” (Relevant Market for Cotton Textile).

22. Based on the submissions of the parties, it is noted that both the combined market share of GIL and Century Textile in the Relevant Market for Cotton Textile and the increment in market share is miniscule. Further, there are other players present in the market such as Raymond Limited, Vardhman Textiles Limited, Arvind Limited and K.P.R. Mill Limited.

Combination Registration No. C-2022/07/952

Identification and Assessment of Vertical Relationship

23. With respect to vertical relationships between the products and services of the Parties, it is submitted that the activities of the affiliates of KMB Family and the affiliates of the Target, Padmavati, Pilani, Century Textile, Century Enka and Ganesh Tubes exhibit certain vertical relationships.

24. The Commission decided to assess the Proposed Combination in relation to the relevant market(s)/segment(s) as identified with regard to Vertical Relationship by the Parties in the notice. The Commission, however, decided to leave the exact delineation of the relevant market as open, due to the reasons enumerated in the ensuing paragraphs of this order.

A. Vertical Relationship I –Rayon Grade Pulp manufactured by Century Textile used by GIL for manufacture of VSF and VFY

25. It is stated in the notice that Century Textile‟s „pulp and paper‟ division is engaged inter alia in the manufacture of Rayon Grade Pulp which is used by GIL as a raw material in the manufacturing of VSF and VFY (which belong to the market for manufacture and sale of MMF and Cotton). It is submitted that the relevant market may be defined at the upstream level as the “Market for manufacture and sale of Rayon Grade Pulp in India” (Relevant Market for Rayon Grade Pulp) and at the downstream level as “Market for manufacture and sale of VSF in India” (Relevant Market for VSF) and “Market for manufacture and sale VFY in India” (Relevant Market for VFY).

Assessment of Vertical Relationship–I:

26. Based on the submissions of the Parties, it is noted that in FY 2020-21 while the market shares of GIL in the relevant markets at downstream level i.e. Relevant Market for VSF3

3 The Parties have provided the market share of GIL in the relevant market of VSF on a without prejudice basis and without conceding to a narrower definition of the relevant market.

Combination Registration No. C-2022/07/952 and Relevant Market for VFY4 were in the range of ………..and [40-45]%, respectively, the market share of Century Textile in the relevant market at the upstream level i.e. Relevant Market for Rayon Grade Pulp was in the range of [0-5]% only. The Parties have submitted that as Century Textile only supplies Rayon Grade Pulp to GIL and KIL and does not compete in open market, the details of competitors are not available with Century Textile. With respect to the downstream markets, the Parties have submitted that GIL faces competition in the market for manufacture and sale of VSF from foreign players such as Lenzing Group, Hebei Jigao, Asia Pacific Rayon and Tangshan Sanyou Chemical Industry Company Limited and in the market for manufacture and sale of VFY from Jilin Chemical Fiber Group Company Limited, Xinxiang Bailu Investment Group Company Limited and Yibin Grace Company Limited. Further, the Parties have submitted that GIL is not dependent on Century Textile to meet its requirement of rayon grade pulp and even if GIL purchased Rayon Grade Pulp exclusively from Century Textile, GIL will not be able to meet its production targets.

B. Vertical Relationship II / Potential Vertical Relationship I-A/ Potential Vertical Relationship I-B (Chemicals produced by GIL/HIL/ TIL used by Century Textile/ KIL/ Century Enka for various purposes)

27. It is stated in the notice that GIL is inter alia engaged in the business of production of various chemicals such as caustic soda, sodium sulphate, sulphuric acid, phosphoric acid, chlorine, etc. These chemicals can be used by Century Textile, KIL and Century Enka for various purposes. Century Textile is engaged in the production of textiles, cotton yarn and cotton blended yarn and pulp, amongst other businesses. KIL is engaged in the manufacture of VFY, and Transparent Paper. Century Enka is engaged in the manufacture of NFY and Nylon Tyre Cord Fabric, among other businesses. All these activities require chemicals for processing.

4 The Parties have provided the market share of GIL in the relevant market of VFY on a without prejudice basis and without conceding to a narrower definition of the relevant market.

Combination Registration No. C-2022/07/952

28. It is submitted that in FY 2020-21, GIL supplied Caustic Soda and Sodium Sulphate to Century Textile which was used in the manufacturing processes of textile and pulp by Century Textile. Further, GIL supplied Caustic Soda and Chlorine to KIL in FY 2020- 21. While Caustic Soda was used by KIL in the manufacturing process of VFY, Chlorine was used by it in the manufacturing process of VFY and Transparent Paper. Accordingly, there exists a vertical relationship between GIL and Century Textile and between GIL and KIL.

29. Separately, GIL also produces Caustic Acid and Phosphoric Acid. Century Enka uses Caustic Soda in the manufacturing process of NFY and Nylon Tyre Cord Fabric; and Phosphoric Acid as an additive in the recovery process during the manufacturing of NFY and Nylon Tyre Cord Fabric. However, the parties have submitted that Century Enka has not procured Caustic Acid or Phosphoric Acid from GIL. Accordingly, this overlap is stated to be purely potential. Additionally, GIL also produces Sulphuric Acid and Carbon Disulphide. Sulphuric Acid is also produced by HIL and TIL. The Parties have submitted that KIL uses captively produced Carbon Disulphide and Sulphuric Acid in the manufacturing process of Transparent Paper and does not procure Carbon Disulphide or Sulphuric Acid from third parties.

30. The Parties have submitted that at the broad level the upstream market of overall chemicals may be defined as “Market for manufacture and sale of chemicals in India ” (Relevant Market for Overall Chemicals). At the narrow level, the upstream relevant markets can be defined as “Market for manufacture and sale of Caustic Soda in India” (Relevant Market for Caustic Soda), “Market for manufacture and sale of Sodium Sulphate in India” (Relevant Market for Sodium Sulphate), “Market for manufacture and sale of Phosphoric Acid in India” (Relevant Market for Phosphoric Acid) and “Market for manufacture and sale of Chlorine in India” (Relevant Market for Chlorine) (collectively, Upstream Relevant Markets). Further, the relevant downstream markets may be defined as “Market for production of Textiles in India” (Relevant Market for Textiles), “Market for the production of cotton yarn and cotton blended yarn in India” (Relevant Market for Cotton Yarn and Cotton Blended

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Yarn), “Market for production of Pulp in India” (Relevant Market for Pulp), Relevant Market for VFY and “Market for manufacture and sale of Transparent Paper in India” ((Relevant Market for Transparent Paper) (collectively, Downstream Relevant Markets). (Vertical Relationship II).

31. As stated earlier, Century Enka is engaged in manufacture and sale of NFY and Nylon Tyre Cord Fabric which requires caustic soda and phosphoric acid for processing. Since, GIL has not supplied any chemicals to Century Enka, there exists a potential vertical relationship (Potential Vertical Relationship I-A). The relevant markets for this potential vertical relationship may be defined at the upstream level as Relevant Market for Caustic Soda and Relevant Market for Phosphoric Acid and at the downstream level as “Market for manufacture and sale of NFY in India” (Relevant Market for NFY) and “Market for manufacture and sale of Nylon Tyre Cord Fabric in India” (Relevant Market for Nylon Tyre Cord Fabric).

32. Further, it is stated that KIL produces Transparent Paper and captively uses Sulphuric Acid and Carbon Disulphide produced by it for manufacturing transparent paper. However, it is noted that Sulphuric Acid is also manufactured by GIL, HIL and TIL, and Carbon Disulphide is also manufactured by GIL as well which may be used for the production of Transparent paper. Therefore, there may exist a potential vertical relationship in this regard also (Potential Vertical Relationship I-B). The relevant markets for this potential vertical relationship may be defined at the upstream level as Relevant Market for Sulphuric Acid, Relevant Market for Carbon Disulphide and at the downstream level as “Market for the manufacture and sale of Transparent paper” (Relevant Market for Transparent Paper).

33. In relation to Vertical Relationship II, it is noted from the submissions of the Parties, that the market share of GIL in the Relevant Market for Overall Chemicals is not available; however, the Parties have provided market shares of GIL in FY 2020-21 in the upstream Relevant Markets for Caustic Soda, Sodium Sulphate, Phosphoric Acid and Chlorine, which are in the range of [15-20]%, [25-30]%, [20-25]% and [30-35]% in Combination Registration No. C-2022/07/952 terms of volume, respectively. Further, the market share of Century Textile in each of the Downstream Relevant Markets is in the range of [0-5%] in terms of value and volume respectively. The market share of KIL in each of Downstream Relevant Markets for VFY and Transparent Paper is in the range of [10-15]% and [0-5%] in terms of value and volume respectively. Further, it is noted that each of the Upstream Relevant Markets are characterized by the presence of other players such as Gujarat Alkali and Chemicals Limited, DCM Shriram Limited and Meghmani Finechem Limited in the Relevant Market for Caustic Soda; Prakash Chemicals International Private Limited, Atul Limited, Innova Corporate (India), Nilkanth Organics Private Limited in the Relevant Market for Sodium Sulphate; Gujarat Alkali and Chemicals Limited, Nirma Limited in the Relevant Market for Phosphoric Acid; and Gujrat Alkali and Chemicals Limited, DCM Shriram Consolidated Limited and Tata Chemicals Limited in the Relevant Market for Chlorine.

Also, each of the Downstream Relevant Markets have presence of other players, such as, Raymond Limited, Vardhman Textiles Limited, Arvind Limited, K.P.R. Mill Limited., among others in the Relevant Market for Textile; ITC Limited, Tamilnadu Newsprint and Papers Ltd, JK Paper Ltd, among others in the Relevant Market for Pulp; and Jilin Chemical Fiber Group Company Limited, Xinxiang Bailu Investment Group Company Limited and Yibin Grace Company Limited in the Relevant market for VFY. Moreover, with respect to the inter se relationship amongst them, the Parties have submitted that the revenue generated by GIL from sale of chemicals to Century Textile and KIL is miniscule in comparison to the total sale of chemicals in each of the Upstream Relevant Markets; therefore, even if GIL chose to sell chemicals exclusively to Century Textile or KIL, its inventory of chemicals will remain unsold. Given the high market shares of the Parties in the Relevant Market for VFY at the downstream level and the merger of only two existing domestic players in the said relevant market, the Acquirer was required to provide certain clarification/ information(s) in relation to the same.

34. Based on the submissions of the Parties regarding Potential Vertical Relationship I-A, it is noted that the market shares of GIL in the Relevant Market for Caustic Soda and Phosphoric Acid at the upstream level are in the range of [15-20]% and [20-25]% in Combination Registration No. C-2022/07/952 terms of volume and the market share of Century Enka in the Relevant Market for Nylon Tyre Cord Fabric at the downstream level is in the range of [25-30]% in terms of volume; however, the Parties have submitted that market share in the Relevant Market for NFY is not available. Nonetheless, it is noted from the submissions of the Parties that there are other players in both the upstream and the downstream relevant markets and that Century Enka‟s requirement of the Caustic Soda and Phosphoric Acid is insignificant when compared to GIL‟s production. Accordingly, it appears that Potential Vertical Relationship I-A is not likely to raise any competition foreclosure concerns.

35. Based on the submissions of the Parties regarding Potential Vertical Relationship I-B, it is noted that the market shares of GIL, HIL and TIL in the Relevant Market for Sulphuric Acid and Carbon Disulphide at the upstream level are in the range of [0-5]% and [5-10]%, in terms of value, respectively, and the market share of KIL in the Relevant Market for Transparent Paper at the downstream level is in the range of [0- 5]%, in terms of value. Further, there are other players present in both the upstream and the downstream relevant markets. Accordingly, it appears that Potential Vertical Relationship I-B is not likely to raise any competition foreclosure concerns.

C. Vertical Relationship III/ Potential Vertical Relationship II (VSF/ VFY manufactured by GIL used by Century Textile in manufacture of Textile)

36. It is submitted that GIL is engaged in the manufacture and sale of VSF which belongs to the Relevant Market for MMF and Cotton, which is used by Century Textile in the manufactures of textiles. The Parties have submitted that relevant market at the upstream level may be defined as Relevant Market for MMF and Cotton or narrowly as Relevant Market for VSF and the relevant market at the downstream level may be defined as the Relevant Market for Textiles. (Vertical Relationship III)

37. Further, it is submitted that GIL manufactures VFY which is used in the manufacture of Textile and Century Textile is engaged in the manufacture and sale of Textile. Thus, there may exist a potential vertical relationship between GIL in the Relevant Market for Combination Registration No. C-2022/07/952

VFY at the upstream level and Century Textile in the Relevant Market for Textiles at the downstream level. (Potential Vertical Relationship II)

38. Based on the submissions of the Parties, it is noted that the market share of GIL in the Relevant Market of VSF is in the range of ……….in terms of volume and the market share of Century Textile in the Relevant Market of Textiles is miniscule. Further, there are players such as Raymond Limited, Vardhman Textiles Limited, Arvind Limited, K.P.R. Mill Limited among others in the Relevant Market for Textiles at the downstream level.

39. With respect to the Potential Vertical Relationship II, it noted from the submissions of the Parties that Century Textile has not procured VFY from any party in the past for the manufacture of Textile. Therefore, this overlap is purely notional.

D. Vertical Relationship IV (Textiles manufactured by Century Textile used in the manufacture of apparels by ABFRL)

40. It is submitted that Century Textile manufactures textile/unfinished cloth which can be used for the manufacture of apparels by ABFRL. The Parties have submitted that the relevant market at the upstream level may be defined as Relevant Market for Textiles and at the downstream level as “Market for manufacture and sale of Apparels in India” (Relevant Market for Apparels).

41. Based on the submissions of the parties, it is noted that the market share of the Parties is in the range of [0-5]%, in terms of value and/ or volume in relevant markets at both the upstream and the downstream level. Further, the Relevant Market for Textiles at the upstream level is characterized by the presence of other players such as Raymond Limited, Vardhman Textiles Limited, Arvind Limited and K.P.R. Mill Limited and the Relevant Market for Apparels at the downstream level has presence of other players such as Arvind Limited, Page Industries, Trent Limited and Raymond Limited.

Combination Registration No. C-2022/07/952

E. Vertical Relationship V (Carbon black additives manufactured by Birla Carbon used in manufacture of tyres by Birla Tyres)

42. It is stated in the notice that Birla Carbon India Private Limited (Birla Carbon), an affiliate of KMB Family, is engaged inter alia in the manufacture of „carbon black additives‟. Carbon black additives are used in a diverse group of materials to enhance their physical, electrical and optical properties. When carbon black additives are used in tyres and other rubber products, it is primarily used as a filler. Further, Birla Tyre, an affiliate of the Target, is engaged in the manufacture of tyres for various types of automobiles. It is submitted that the Birla Tyre plant for manufacture of tyres has not been operational since the past 8 months. Further, at the time of filing of the notice, Birla Tyre is undergoing Corporate Insolvency Resolution Process under the provisions of the Insolvency and Bankruptcy Code.

43. The Parties have submitted that Birla Tyre can utilise the carbon black additives manufactured by Birla Carbon in the manufacture of tyres. The Parties have submitted that for the purposes of assessment of this vertical relationship the relevant market at the upstream level may be defined as “Market for manufacture and sale of carbon black additives in India” (Relevant Market for Carbon Black Additives) and at the downstream level may be defined as “Market for manufacture and sale of tyres in India” (Relevant Market for Tyres).

44. Based on the submissions of the parties, it is noted that the market share of Birla Carbon in the Relevant Market for Carbon Black Additives at the upstream level is in the range of [30-35]% and the market share of Birla Tyre in the Relevant Market for Tyres at the downstream level is miniscule both in terms of value and/ or volume. Further, the Relevant Market for Carbon Black Additives at the upstream level is characterized by the presence of other players such as PCBL Limited, Himadri Speciality Chemicals Limited, Continental Carbon India Limited, Balkrishna Industries Limited and Epsilon Carbon Private Limited and the Relevant Market for Tyres at the downstream level has

Combination Registration No. C-2022/07/952 presence of other players such as Apollo Tyres Limited, MRF Limited, CEAT Tyres and JK Tyre & Industries Limited.

F. Vertical Relationship VI (Redmud and Phospho-gypsum produced by HIL used in manufacture of grey cement by MCL)

45. The Parties have submitted that HIL produces (i) phospho-gypsum, and (ii) red-mud. Both these products are waste by-products and of insignificant commercial value. Further, it is submitted that MCL procures redmud from HIL for manufacture of grey cement. Redmud is primarily generated as process waste by HIL as a result of its alumina manufacturing process. Cement manufacturing companies typically obtain this redmud for free and at times, by paying a nominal cost.

46. MCL also procures phospho-gypsum from HIL for the manufacture of grey cement. HIL generates phospho-gypsum as an involuntary by-product waste during the manufacture of phosphoric acid and provides the same to cement manufacturing companies such as MCL. The relevant market at the upstream level may be defined as “market for manufacture and sale of redmud” and at the downstream level may be defined as “the market for manufacture and sale of grey cement”.

47. Based on the submissions of the parties, it is noted that HIL is required to dispose of the redmud generated due to limitation of space and the fact that it cannot be stored for a long duration. Further, phospho-gypsum also cannot be stored for a long duration since, it is highly toxic. Accordingly, HIL disposes off these products to cement manufacturing companies such as MCL. In relation to inter se relationship, the Parties have submitted that MCL procured an insignificant amount for a miniscule cost from HIL in FY 2020- 21, however, given that phospho-gypsum is a waste product, its commercial data is not available.

Modifications Offered by the Acquirer

Combination Registration No. C-2022/07/952

48. With respect to the possible competition concerns raised during the review of the Proposed Combination by the Commission, inter alia, in relation to: (1) Market for manufacture and sale of VFY in India and (2) Market for manufacture and sale of Grey Cement in Rajasthan Relevant Market, Western Uttar Pradesh Relevant Market and Karnataka Relevant Market, the Parties have submitted that post the Proposed Combination, GIL, UltraTech, KIL and MCL will continue to function as independent entities as the control of the respective companies will remain vested with distinct groups. Further, the Acquirer group will de facto not acquire any special rights or material influence over KIL or MCL and both the entities will remain under the control of the BKB Family only (despite the shareholding of the Acquirer group being higher than the BKB Family in these entities, post the Proposed Combination).

49. In this regard, the Acquirer also made a submission dated 30.08.2022, in terms of Regulation 19(2) of the Combination Regulations through which it offered certain modifications. The modifications offered by the Acquirer are enclosed at Annexure A.

Observations of the Commission and decision

50. The Commission notes that the modification proposed by the Acquirer is adequate to address the competition concerns that may otherwise result from the Proposed Combination.

51. Considering the material on record including the details provided in the Notice under Section 6(2) of the Act 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 subject to carrying out of modifications under Regulation 19(2) of Combination Regulations.

Combination Registration No. C-2022/07/952

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

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

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