Allowed

1. MacRitchie Investments Pte. Ltd. 2. EvolutionX Debt Capital Master Fund 1 Pte. Ltd.

CCI30 Jan 2024C-2023/12/1084

Case brief

AI extract

What is this about?

The Competition Commission of India considered a notice under the Competition Act regarding a proposed combination involving API Holdings Limited. The Commission assessed horizontal overlaps and vertical linkages in the healthcare sector and determined the proposal would not cause appreciable adverse effect on competition, approving it under Section 31(1).

What did the court decide?

The Proposed Combination is approved under Section 31(1) of the Act.

1. MacRitchie Investments Pte. Ltd. 2. EvolutionX Debt… — Company and Corporate | CCI (2024)

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COMPETITION COMMISSION OF INDIA

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Combination Registration No. C-2023/12/1084

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30^th January 2024

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Notice under Section 6(2) of the Competition Act, 2002 given by MacRitchie Investments Pte. Ltd. and EvolutionX Debt Capital Master Fund 1 Pte. Ltd.

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CORAM:

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Mr. Anil Agrawal Member Ms. Sweta Kakkad Member Mr. Deepak Anurag Member

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

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On 4^th December 2023, the Competition Commission of India ( Commission ) received a notice under Section 6(2) of the Competition Act, 2002 ( Act ), given by MacRitchie Investments Pte. Ltd. (MacRitchie) and EvolutionX Debt Capital Master Fund 1 Pte. Ltd. ( EvoX ) [hereinafter, MacRitchie and EvoX are collectively referred to as the ‘ Acquirers ’]. The notice relates to the proposed subscription of series B compulsorily convertible preference shares ( CCPS B ) in API Holdings Limited ( API / Target ) by the Acquirers.

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MacRitchie and EvoX are existing investors of API. MacRitchie holds around 14 percent of the equity share capital of API on a fully diluted basis along with certain rights including, inter alia , a right to appoint a director or a non-voting observer on the Board of API and certain information and inspection rights. EvoX presently holds nonconvertible debentures ( NCDs ) of Target.

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Combination Registration No. C-2023/12/1084

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At present, Target is in the process of raising additional capital by issuing CCPS B by way of a rights issue ( CCPS B Rights Issue ) as per the mechanism set out in the letter of offer dated 25^th September 2023 ( Offer Letter ) and proposes to raise up to INR 3,500 crores ( Total Issuance Amount ). In terms of the Offer Letter, the CCPS B issued by Target will be offered: (a) to its existing equity shareholders in proportion to their respective equity shareholding; and (b) if any portion of the Total Issuance Amount remains unsubscribed ( Unsubscribed Available Portion ), the board of the Target will allot the same in the following waterfall mechanism:

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a. Firstly, to Pre-emption Holders, who have opted for such subscription in excess of their respective rights entitlement;

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b. Secondly, to the CCPS A holders in proportion to their respective shareholding on a fully diluted basis (computed only on account of CCPS A held by such shareholder), for a specified aggregate amount, to the extent available;

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c. Thirdly, to the employees who hold employee stock ownership ( ESOPs ) in proportion to their respective shareholding on a fully diluted basis (computed only on account of ESOPs held by such holder) for a specified aggregate amount, to the extent available;

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d. Fourthly, to MEMG International India Private Limited ( MEMG ) and coinvestors identified by MEMG (together referred to as ‘ Incoming Investors ’); and

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e. Lastly, to any persons, any portion of the Unsubscribed Available Portion remaining unallocated after offering to persons set out in (a) to (d) above, at the sole discretion of the board of the Target.

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Further, on 18^th September 2023, a binding term sheet was executed, inter alia , between the Target, MacRitchie and certain other existing investors and incoming investor, Naspers Ventures B.V. (P rosus ), and CDPQ Private Equity Asia Pte. Ltd. ( CDPQ ) (together referred to as ‘ Existing Investors’ ) with MEMG ( Binding Term Sheet ) as per which it was agreed that the Unsubscribed Available Portion would also be offered to Existing Investors in accordance with the terms of the Binding Term Sheet.

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Combination Registration No. C-2023/12/1084

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Separately, as part of the terms of partial settlement of NCDs, it has been agreed that the Lenders viz. , Goldman Sachs (India) Alternative Investment Management Private Limited ( Goldman Sachs ) and EvoX would be issued certain CCPS B for a specified aggregate amount on the same terms as are being offered to MEMG ( Subscription Securities ), either out of Unsubscribed Available Portion, if available, or through preferential allotment and a portion of the debt will be settled by Target by utilising the proceeds of the CCPS B Rights Issue. To record the terms of partial settlement of NCDs, the Target, on 1^st December 2023, entered into a framework agreement ( Framework Agreement ), Securities Subscription Agreement ( SSA ), and fourth amended and restated debenture trust deed ( Amended DTD ) with Vistra ITCL (India) Limited (acting as a debenture trustee on behalf of the Lenders).

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The proposed combination involves: (i) MacRitchie’s subscription of around 2 percent of the equity share capital of Target on a fully diluted basis in accordance with the Binding Term Sheet read with the Offer Letter ( MacRitchie Subscription ); and (ii) EvoX’s subscription of up to 1 percent of the equity share capital of Target on a fully diluted basis in accordance with the Framework Agreement read with the SSA ( EvoX Subscription ) [hereinafter, the MacRitchie Subscription and the EvoX Subscription are together referred to as the ' Proposed Combination '].

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In terms of Regulation 14(3) of the Competition Commission of India (Procedure in regard to the transaction of business related to combinations) Regulations, 2011 ( Combination Regulations ), the Commission, vide letter dated 15^th December 2023 ( RFI ), sought certain information and clarifications regarding, inter alia , existing shareholding/rights of MacRitchie, shareholding proposed to be acquired by MacRitchie, broader scheme of the issue of shares by API, etc . The Acquirers submitted their response on 5^th January 2024 after seeking an extension of time ( Response to RFI ). Apart from the Response to RFI, the Acquirers provided certain additional information/clarifications on 19^th January 2024 ( Additional Submissions ).

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Combination Registration No. C-2023/12/1084

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MacRitchie, incorporated in Singapore, is an investment holding company and does not engage in any business operation other than holding investments. It is an indirect whollyowned subsidiary ( WOS ) of Temasek Holdings (Private) Limited ( Temasek ), being the ultimate parent company. Temasek is an investment company based in Singapore. As submitted, Temasek’s portfolio spans a broad spectrum of industries: Financial Services; Transportation & Industrials; Telecommunications, Media & Technology; Consumer & Real Estate; Life Sciences & Agri-Food; multi-sector funds as well as others (including credit).

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EvoX, incorporated in Singapore, is jointly held by Temasek and DBS Group Holdings Ltd. ( DBS ). Further, Temasek holds around 29 percent of the equity share capital of DBS. EvoX is a growth-stage debt financing platform engaged in providing less dilutive financing to technology-enabled companies across Asia, with a focus on India, China, and Southeast Asia.

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API, incorporated in India, is the ultimate holding company of the Target Group. As submitted, API directly or through its affiliates is, inter alia , engaged in the activities of (a) wholesale sale and distribution of pharmaceutical products, medical devices, and overthe-counter ( OTC ) products including fast-moving consumer goods ( FMCG ), etc. ; (b) provision of logistics services primarily focussed on pharmaceuticals sector; (c) marketing and selling under a private label brand, of certain OTC products (including nutraceutical products) and pharmaceutical products; (d) provision of diagnostic services; (e) provision of tele-medical consultation services; and (f) developing technology and providing platforms/ software/ tools including marketplace(s), healthcare marketing and data analytics on trends in the pharmaceutical industry, etc. One of the affiliates of API owns the platform 'PharmEasy' which is a marketplace that facilitates the retail sale of pharmaceutical products, medical devices, OTC products, etc¹ .

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1 The Target Group has licensed the operation of the ‘PharmEasy’ marketplace to a third party, Axelia Solutions Private Limited ( Axelia ), which holds a non-exclusive license to use the intellectual property and information technology in relation to the ‘PharmEasy’ platform and as such, operates the ‘PharmEasy’ platform. Axelia is held by Aarman Solutions Private Limited ( Aarman ) and Target holds 19.99 percent equity stake in Aarman.

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Combination Registration No. C-2023/12/1084

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The activities of Target broadly relate to the healthcare sector. Based on the information given in the Notice, it is observed that neither EvoX nor DBS have any investments (which meet the Materiality Thresholds² ) that may be considered to give rise to any horizontal overlaps, vertical and complementary linkages with the activities of the Target Group in India. Based on the Materiality Thresholds, certain Temasek Portfolio Entities have been identified by the Acquirers which are active in the healthcare sector in India giving rise to certain horizontal overlaps and vertical linkages with the activities of certain API Portfolio Entities in India.

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Within the healthcare sector, the Temasek Portfolio Entities and API Portfolio Entities present a horizontal overlap in the following segments: (a) Provision of diagnostic services (b) Provision of tele-medical consultation services; (c) Provision of wholesale sale and distribution of OTC products including FMCG, personal care products, mother and baby care products, nutraceuticals, etc.; (d) Facilitation of retail sale of pharmaceutical products, medical devices and OTC products including FMCG, personal care products, mother and baby care products, nutraceuticals, etc .

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As can be observed, the aforesaid segments also constitute a vertical linkage considering the value chain of the healthcare sector. Apart from those vertical linkages, based on the information given in the Notice, the Commission observed that further vertical linkages may arise on account of the presence of Temasek Portfolio Entities in the segments of manufacture and sale of pharmaceutical products, manufacture, and sale of medical devices, manufacture, and sale of OTC products, manufacture of pathology devices, manufacture of radiology devices, provision of healthcare services through hospitals and presence of API Portfolio Entities in the segment of provision of white-labelling of pharmaceutical and OTC products.

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The aforesaid segments may be further sub-segmented. To illustrate, the diagnostics market can be sub-segmented as pathology and radiology sub-segments and retail sale of

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2 The Materiality Thresholds as per the Guidance Note to Form I.

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Combination Registration No. C-2023/12/1084

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pharmaceutical products, medical devices, and OTC products may also be considered as separate segments for the purpose of competition assessment of the aforesaid horizontal overlaps/vertical linkages. From the relevant geographic market perspective, the frame of reference can be considered as pan India, and for certain segments viz. , diagnostic services and its sub-segments, the frame of reference can be narrowed down to the overlapping city level. However, for the reasons given in the ensuing paragraphs, the Proposed Combination is not likely to result in any appreciable adverse effect on competition ( AAEC ) irrespective of the manner in which the relevant market is delineated and accordingly, the Commission decides to leave precise delineation of relevant market open.

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The Commission observed that MacRitchie is an existing shareholder and pursuant to the Proposed Combination, MacRitchie’s shareholding in the Target will be diluted from around 14 percent to around 9 percent and EvoX, an existing debenture holder, will hold an insignificant shareholding of up to 1 percent. Though the Acquirers would gain certain incremental rights in API, the same seen together with the post Proposed Combination shareholding does not appear to likely to result in any significant change in management/control dynamics of API, and consequently, the Proposed Combination is not likely to change the operational dynamics of API or to change the ability/incentive of the Acquirers or the combined entity in any significant manner so as to cause an appreciable adverse effect on competition in any plausible relevant markets that could be delineated.

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Further, the presence of Temasek Portfolio Entities and API Portfolio Entities in various relevant markets considering the specifics of the Proposed Combination is insignificant on a standalone and consolidated basis as reflected in their individual or combined market shares and the competition landscape of the respective segment/sub-segments. The same is indicative of the lack of any likelihood of the Proposed Combination leading to AAEC in any of the horizontally affected markets and conferring any ability/incentive to the parties involved for potentially engaging in any foreclosure strategies in any of the vertically affected segments.

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Combination Registration No. C-2023/12/1084

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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.

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

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The information provided by the Acquirers 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 Acquirers accordingly.

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1. MacRitchie Investments Pte. Ltd. 2. EvolutionX Debt Capital Master Fund 1 Pte. Ltd.

Case brief

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1. MacRitchie Investments Pte. Ltd. 2. EvolutionX Debt Capital Master Fund 1 Pte. Ltd.

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