Verventa Holdings Ltd.

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COMPETITION COMMISSION OF INDIA

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(Combination Registration No.C-2022/09/967)

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20.10.2022

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Notice under Section 6(2) of the Competition Act, 2002 filed by Verventa Holdings Ltd.

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CORAM:

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Mr. Ashok Kumar Gupta Chairperson

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Ms. Sangeeta Verma Member

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Mr. Bhagwant Singh Bishnoi Member

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

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On 08.09.2022, the Competition Commission of India ( Commission ) received a notice under sub-section (2) of Section 6 of the Competition Act, 2002 ( Act ) filed by Verventa Holdings Ltd. ( Acquirer ). The notice has been filed pursuant to Investment Agreement executed on 29.07.2022, by and between the Acquirer and YES Bank Limited ( Target ) (Hereinafter, Acquirer and Target are collectively referred to as the Parties ).

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The proposed combination relates to the acquisition of equity securities amounting to up to 10% of the total paid up share capital and voting rights of the Target by the Acquirer. ( Proposed Combination ). The Proposed Combination entails subscription to equity shares and warrants of the Target by the Acquirer through a preferential allotment. It is

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Combination Registration No. C-2022/09/967

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stated that the total shareholding of the Acquirer in the Target after conversion of all the warrants shall not be more than 10% of the total paid up share capital and voting rights of the Target.

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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 20.09.2022, sought certain information(s)/clarification(s), inter alia , relating to the activities of the Parties; a response to the same was received on 28.09.2022 and 11.10.2022.

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The Acquirer is an investment holding company incorporated in Cyprus. It is a stepdown subsidiary of AI Global Investments (Cyprus) PCC Limited ( AI Global ), which will on consummation of the proposed transaction be indirectly held by 13 funds/limited partnerships. These funds/ limited partnerships are advised/ or managed by Advent International Corporation ( AIC ) or its affiliates.

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AI Global is a private company incorporated in Guernsey and registered in Cyprus as an overseas company. It operates as a place of business in Cyprus. It is the investment hub for Asia for funds managed by Advent International. Apart from this, there are no other business activities that are carried out by AI Global in India.

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AIC is an investment advisor registered with the United States Securities and Exchange Commission. It is a global private equity investor and focuses on investments in five core sectors, including business and financial services, health care, industrial, retail, consumer and leisure, and technology. It has an indirect subsidiary in India, inter alia , Advent India PE Advisors Private Limited.

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The Target is publicly held banking company engaged in providing a range of banking and financial services. It is a 'Full-Service Commercial 'Bank' offering a complete range of products, services and technology driven digital offerings, catering to retail, MSME enterprises as well as corporate clients. It has one wholly owned subsidiary, YES

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Combination Registration No. C-2022/09/967

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Securities (India) Limited ( YSIL ), which is a full-scale capital markets intermediary offering retail, high net-worth individuals, corporate and institutional customers a comprehensive range of products and services encompassing broking, fund management, investment banking, merchant banking, research and institutional equities sales and trading. In addition, there are certain entities in respect of which due to the default of the relevant entity the Target has invoked a pledge and the Target possesses certain shareholding (which could be less than or more than 10% shareholding) pursuant to such invocation of pledge (hereinafter, ‘ Relevant entities ’).

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In relation to identification of overlaps, it is submitted that Aditya Birla Capital Limited ( ABCL ), Planet Payment Group ( Planet ) and Idemia France S.A.S ( Idemia ), portfolio companies of Advent International, operate in the financial services and related sectors ( Overlapping Portfolio Companies ). Further, the Target and/or YSIL are also engaged in financial services.

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Based on the products or services of the Parties/their portfolio companies/their affiliates, the Parties have identified horizontal overlaps in the following products or services: (i) wealth advisory and management services, (ii) loans and lending services (including narrower sub-segments), (iii) loans against securities, (iv) brokerage services (including narrower sub-segments), (v) distribution of insurance products (including narrower subsegments), (vi) payment processing services and (vii) depository services.

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Accordingly, the Parties have submitted that the relevant markets can be defined as ‘ Market for provision of wealth advisory and management services in India ’( Relevant Market 1 ); ‘ Market for provision of loans and lending services in India ’ (Relevant Market 2) which can be segmented into ‘Retail Loans’ and ‘Wholesale Loans’, which in turn can be further sub-segmented into: (a) ‘ Narrow Market for provision of home loans in India ’ ( Home loans market ); (b) ‘ Narrow market for provision of personal loans in India ’ ( Personal loans market ); (c) ‘ Narrow market for provision of MSME loans in India ’ ( MSME loans market ); and (d) ‘ Narrow market for provision of loans

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Combination Registration No. C-2022/09/967

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against property in India ’ ( LAP market ) and the segment of Wholesale Loans can be further sub-segmented into (a) ‘ Narrow market for provision of corporate loans in India ’ ( Corporate loans market ) and ‘ Narrow market for provision of construction finance (including project finance) or real estate loans in India ’ ( Construction loans market ); ‘ Market for loans against securities in India ’ ( Relevant Market 3 ); ‘ Market for brokerage services in India ’ ( Relevant Market 4 ); ‘ Market for distribution of insurance products in India ’ ( Relevant Market 5 ); ‘ Market for payment processing services in India ’ ( Relevant Market 6 ) and ‘ Market for depository services in India ’ ( Relevant Market 7 ). [The Relevant Markets 1 to 7 set out above are collectively referred to as ‘the Relevant Markets’].

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With respect to Vertical Relationships, the Parties have submitted that there are no existing vertical relationships and/or complementary linkages between the products or services offered by the Parties/their portfolio companies/their affiliates. However, the products or services offered by the Overlapping Portfolio Companies have certain potential linkages to the activities of the Target and YSIL in relation to (i) provision of portfolio management services/referral of portfolio management services ( Potential Vertical Relationship 1 ); (ii) provision of life insurance products/distribution of life insurance products ( Potential Vertical Relationship 2 ); (iii) provision of health insurance products/distribution of health insurance products ( Potential Vertical Relationship 3 ); (iv) mutual funds products / distribution of mutual funds ( Potential Vertical Relationship 4 ); (v) card issuance and personalization services/card business ( Potential Vertical Relationship 5 ); (vi) payment gateway services/ payment processing services ( Potential Vertical Relationship 6 ); (vii) ISO¹ services and merchant acquisition services ( Potential Vertical Relationship 7 ); and provision of alternate investment funds (AIFs) and distribution of AIFs ( Potential Vertical Relationship 8 ). [The Potential Vertical Relationships 1 to 8 set out above are collectively referred to as ‘the Potential Vertical Relationships’ ].

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1 Independent Service Organization ( ISO )

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Combination Registration No. C-2022/09/967

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Accordingly, in relation to the above Potential Vertical Relationships, the Parties have identified the following relevant markets at the upstream level: (i) ‘ Market for provision of portfolio management services in India’ ( PMS market ) which may be further segmented on the basis of the business activities into (a) Discretionary PMS; (b) Nondiscretionary PMS; (c) PMS for equity; and (d) PMS for debt,; (ii) ‘ Market for provision of life insurance products in India’ ( Life insurance market ); (iii) ‘ Market for provision of health insurance products in India ’ ( Health insurance market ); (iv) ‘ Market for mutual funds in India’ ( Mutual funds market ); (v) ‘ Market for card issuance and personalization services in India’ ( Card issuance market ); (vi) ‘ Market for payment gateway services in India’ ( Payment gateway market ); (vii) ‘ Market for ISO services in India’ ( ISO market ) and (viii) ‘ Market for provision of AIFs in India ’ ( AIFs Market ).

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Further, the Parties have identified following relevant markets at the downstream level for the Potential Vertical Overlaps: (i) ‘ Market for referral of portfolio management services in India ’ ( PMS referral market ); (ii) ‘ Market for distribution of life insurance products in India ’ ( Life Insurance Distribution Market ); (iii) ‘Market for distribution of health insurance products in India ’ ( Health Insurance Distribution Market ) ((iv) ‘ Market for distribution of mutual funds in India ’ ( Mutual funds distribution market ) (v) ‘Market for card business in India ’ ( Card business market ); (vi) ‘ Market for payment processing services in India ’ (Relevant Market 6) (Potential Vertical Relationship 6); (vii) ‘ Market for merchant acquisition services in India ’ ( MAS market ) and (viii) ‘ Market for distribution of AIFs in India ’.

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As per the submissions in the notice, the Acquirer/its portfolio companies/its affiliates are present at the upstream level in all Potential Vertical Relationships except Potential Vertical Relationship 6. Similarly, the Target/its portfolio companies/its affiliates are present at the downstream level in all Potential Vertical Relationships except Potential Vertical Relationship 6.

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Combination Registration No. C-2022/09/967

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The Commission decided to assess the Proposed Combination in the relevant markets and their segments/ sub-segments identified by the Parties. However, exact delineation of the relevant market has been left open as the material available on record does not suggest that the Proposed Combination is likely to cause any competition concern in India.

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Based on the submissions of the Parties in relation to horizontal overlaps, it is noted that the combined market shares and/or the incremental market shares of the Parties/their portfolio companies/their affiliates in the Relevant Markets are in the range of [0-5]%. Also, other players are present in each of the Relevant Markets. Further, in relation to Potential Vertical Relationships, it noted that the market shares of the Parties/their Portfolio Companies/their affiliates are in the range of [0-5]%, in both the upstream and the downstream relevant markets; except in Potential Vertical Relationship 4 and 5 where the market share at the upstream level is in the range of [5-10]% and [30-35]% in the Mutual funds market and Card issuance market, respectively. However, here also the market share at the downstream level is miniscule in the Mutual Funds Distribution Market and Card business market, respectively. Further, the relevant markets at both the upstream and the downstream level are competitive with the presence of other players in each of the relevant markets identified by the Parties. Accordingly, the Proposed Combination is not likely to raise any competition foreclosure concerns.

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With respect to the Relevant Entities in which the Target possesses certain shareholding pursuant to invocation of pledge, the Parties have submitted that there may be potential vertical linkage between one of the Portfolio companies of AIC i.e., INNIO Jenbache GmbH & Co OG, which is engaged in the business of manufacturing and sale of reciprocating gas engines and one of Relevant Entities i.e. Rosa Power, which is engaged in the business of generation of thermal power. However, given that the market share of Rosa Power in the market for generation of thermal power in India in terms of total installed capacity is miniscule, the said potential vertical linkage is not likely to raise foreclosure concern.

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Combination Registration No. C-2022/09/967

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Considering the facts on record, details provided in the notice given under sub-section (2) of Section 6 of the Act, and the assessment of the Proposed Combination on the basis of factors stated in sub-section (4) of Section 20 of the Act, the Commission is of the opinion that Proposed Combination is not likely to have an appreciable adverse effect on competition in India. Therefore, the Commission approves the Proposed Combination under Section 31(1) of the Act.

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

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

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The Secretary is directed to communicate to the Acquirer accordingly.

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Verventa Holdings Ltd.

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