Allowed

1. Matrix Pharma Private Limited 2. Kotak Strategic Situations India Fund II 3. Kotak Alternate Asset Managers Limited

CCI13 Feb 2024C-2024/01/1100

Case brief

AI extract

What is this about?

The Competition Commission approved a proposed combination involving an acquisition of Tianish Laboratories by Matrix Pharma and an investment by Kotak funds. After assessing market overlaps and share data, the Commission found no appreciable adverse effect on competition and granted approval under Section 31(1).

What did the court decide?

The proposed combination is approved under Section 31(1) of the Competition Act, 2002.

1. Matrix Pharma Private Limited 2. Kotak Strategic… — Company and Corporate | CCI (2024)

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COMPETITION COMMISSION OF INDIA

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Combination Registration No. 2024/01/1100

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13^th February 2024

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Notice under Section 6(2) of the Competition Act, 2002 filed by Matrix Pharma Private Limited, Kotak Strategic Situations India Fund II and Kotak Alternate Asset Managers Limited.

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CORAM:

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Ms. Ravneet Kaur Chairperson

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Mr. Anil Agrawal Member Ms. Sweta Kakkad Member

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Mr. Deepak Anurag Member

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

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On 3^rd January 2024, the Competition Commission of India ( Commission ) received a notice under sub-section (2) of Section 6 of the Competition Act, 2002 ( Act ) filed by Matrix Pharma Private Limited ( Acquirer ), Kotak Strategic Situations India Fund II ( Investor 1 ) and Kotak Alternate Asset Managers Limited ( KAAML/ Investor 2 ) [Hereinafter Investor 1 and Investor 2 are collectively referred to as the ‘Investors’ . Acquirer and Investors are collectively referred to as the ‘Acquirers’ ].

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Combination Registration No. C-2024/01/1100

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The notice has been filed pursuant to the Share Purchase Agreement dated 1^st October 2023 (SPA ) entered into between the Acquirer, Tianish Laboratories Private Limited ( Target ), IQuest Enterprises Private Limited (IQuest), Viatris Inc., Mylan India, Mylan Luxembourg 2 S.A.R.L., M.P. Laboratories (Mauritius) Ltd. and Mylan Group B.V. and a binding term sheet dated 25^th August 2023 ( Termsheet ) entered into by KAAML, the investment manager of Investor 1, with IQuest, an affiliate of the Acquirer.

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The proposed combination relates to (i) acquisition of 100% of the issued and paid-up equity share capital of the Target (on a fully diluted basis) by the Acquirer ( Proposed Acquisition ) and (ii) subscription to optionally convertible debentures of the Acquirer by the Investors ( Proposed Investment ), investment proceeds of which will be utilized by the Acquirer for its acquisition of the Target in the Proposed Acquisition. It is stated in the notice that the acquisition of the Target by the Acquirer is contingent upon investment by the Investors in the Acquirer, and hence the Proposed Investment is inter-connected with the Proposed Acquisition [ Proposed Combination ].

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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, the Commission, vide communication dated 15^th January 2024, sought certain information(s)/ clarification(s), inter alia, relating to the activities of the Parties and the response to the same was received on 23^rd January 2024.

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The Acquirer is a private limited company incorporated in India in 2022 for the purpose of acquisition of the Active Pharmaceutical Ingredients manufacturing business ( API Business ) of Mylan Laboratories Limited ( Mylan India ). The Acquirer does not presently carry out any business activity either in India or outside India. It is owned and controlled by Mr. Venkata Pranav Reddy Gunupati (Pranav) and his wife, Mrs. Swathi Reddy Gunupati (Swathi), who collectively hold 99.26% of the shareholding of the Acquirer. The entities over which Pranav and Swathi (including with their family members) have: (a) direct or indirect shareholding of 10% or more; or (b) a right or ability to exercise any right not available to ordinary shareholders

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Combination Registration No. C-2024/01/1100

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(including any advantage of a commercial nature); or (c) a right or ability to nominate a director or observer, have been considered as the ‘Acquirer Group’ .

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Investor 1 is a scheme of Kotak Strategic Situations Trust, a trust set up under the Indian Trust Act, 1882, and registered with Securities and Exchange Board of India ( SEBI ) as a Category-II Alternate Investment Fund ( Cat II- AIF ). It is engaged in the business of investing in companies with a sector agnostic approach and its investment objective is to generate target returns by investing in opportunities in India. It does not offer any products or services as it is an investment fund.

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KAAML is the settlor and manager of Investor 1. Kotak Mahindra Bank Limited holds, directly and indirectly, 100% of its shareholding. It acts as an investment manager, inter alia , engaged in the business of managing and advising funds across various asset classes namely: (a) special situations; (b) real estate; (c) infrastructure; (d) private equity; and (e) private credit. It curates and manages investment products for investors and also provides nonbinding investment advisory services to high net-worth individual clients.

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The Target is a private limited company incorporated in India in 2023. It is a wholly owned subsidiary of Mylan India, which in turn is an indirect subsidiary of Viatris Inc. (Viatris), the ultimate parent company of the Viatris group ( Viatris Group ) . The Target does not have any subsidiaries or affiliates and currently does not undertake any commercial activity in or outside India. Post the scheme of demerger of Mylan India becoming effective, the Target will take over the API Business of Mylan India. Upon completion of the transfer of the API Business to the Target, it would be engaged in the business of manufacturing APIs in India, and would have a total portfolio of around 290 APIs.

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It is submitted in the notice that there are no overlaps between the Target on the one hand and the Acquirer or any other entity forming part of the Acquirer Group and the Investors or their

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Combination Registration No. C-2024/01/1100

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ultimate parent entity or portfolio companies¹ on the other hand,. However, Biocon (one of the portfolio companies of Kotak Special Situations Fund (another fund managed by Investor 2) exhibit certain overlaps with business activities of the Target.

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It is stated in the notice that Biocon is engaged in the business of manufacturing APIs in India, of which 13 APIs exhibit a horizontal overlap with the APIs in the Target’s portfolio. Accordingly, the relevant market at the broad level is defined as ‘Market for manufacture and sale of APIs in India’ ( Broad Market ) and at the narrow level, the markets for manufacture and sale of each of the overlapping APIs in India have been identified as: (i) market for manufacture and sale of Apixaban in India ( Apixaban Market ); (ii) market for manufacture and sale of Atorvastatin in India ( Atorvastatin Market ), (iii) market for manufacture and sale of Dapagliflozin in India ( Dapagliflozin Market ), (iv) market for manufacture and sale of Empagliflozin in India ( Empagliflozin Market ), (v) market for manufacture and sale of Fingolimod in India ( Fingolimod Market ), (vi) market for manufacture and sale of Lenalidomide in India ( Lenalidomide Market ), (vii) market for manufacture and sale of Linagliptin in India ( Linagliptin Market ), (viii) market for manufacture and sale of Liraglutide in India ( Liraglutide Market ), (ix) market for manufacture and sale of Rivaroxaban in India ( Rivaroxaban Market ), (x) market for manufacture and sale of Rosuvastatin in India ( Rosuvastatin Market ), (xi) market for manufacture and sale of Sacubitril / Valsartan in India ( Sacubitril / Valsartan Market ), (xii) market for manufacture and sale of Semaglutide in India ( Semaglutide Market ), and (xiii) market for manufacture and sale of Sitagliptin in India ( Sitagliptin Market ) [Hereinafter, the relevant markets at the narrow level are together referred to as the ‘Narrow Markets’ ].

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1 The Parties have confirmed that for the purposes of the Notice, overlaps have been mapped between the Target and the Acquirers as well as (a) all entities forming part of the Acquirer Group; (b) the ultimate parent entity of Investor 2, i.e., Kotak Mahindra Bank Limited, and the entities forming part of Kotak Mahindra Bank Limited’s group; and (c) the portfolio companies (i.e., on account of holding equity instruments, nonconvertible debentures and / or OCDS of such portfolio companies) of Investor 1 and other funds managed by Investor 2 in which any of the Investors has (i) direct or indirect shareholding of 10% or more; or (ii) a right or ability to exercise any right (including any advantage of commercial nature with any of the party or its affiliates) that is not available to an ordinary shareholder; or (iii) a right or ability to nominate a director or observer.

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Combination Registration No. C-2024/01/1100

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It is submitted in the notice that Biocon is also engaged in the manufacture and sale of formulations, both branded and generic, in India. While there are 12 formulations of Biocon that use APIs which form part of the Target’s API portfolio, only 8 such formulations have been manufactured by Biocon in financial year 2022-23 and sold in India. It is stated that there are no existing supply arrangements between the Target and Biocon; however, the 8 identified formulations and their input APIs which form part of the Target’s portfolio have been considered for the purpose of assessing the potential vertical relationships. Accordingly, the relevant markets have been identified as follows:

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(a) Upstream Markets: The relevant markets for manufacture and sale of each of the APIs at the upstream level are identified as: (i) market for manufacture and sale of Atorvastatin in India ( Atorvastatin Upstream Market ); (ii) market for manufacture and sale of Azathioprine in India ( Azathioprine Upstream Market ); (iii) market for manufacture and sale of Rosuvastatin in India ( Rosuvastatin Upstream Market ); (iv) market for manufacture and sale of Telmisartan in India ( Telmisartan Upstream Market ); (v) market for manufacture and sale of Valganciclovir in India ( Valganciclovir Upstream Market) [Hereinafter, the relevant markets at the upstream level are together referred to as the ‘Upstream Relevant Markets’ ].

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(b) Downstream Markets : The relevant markets for manufacture and sale of formulations which use the aforesaid APIs at the downstream level are identified as: (i) market for manufacture and sale of formulations which use Atorvastatin as an input in India ( Downstream Atorvastatin Formulation Market ); (ii) market for manufacture and sale of formulations which use Azathioprine as an input in India ( Downstream Azathioprine Formulation Market ); (iii) market for manufacture and sale of formulations which use Rosuvastatin as an input in India ( Downstream Rosuvastatin Formulation Market ); (iv) market for manufacture and sale of formulations which use Telmisartan as an input in India ( Downstream Telmisartan

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Combination Registration No. C-2024/01/1100

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Formulation Market ) and (v) market for manufacture and sale of formulations which use Valganciclovir as an input in India ( Downstream Valganciclovir Formulation Market ) [Hereinafter, the relevant markets at the downstream level are together referred to as the ‘ Downstream Relevant Markets ’].

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The Commission decides to leave precise delineation of the relevant market open, as it was observed that the Proposed Combination, for the reasons stated in ensuing paragraphs, is not likely to result in any appreciable adverse effect on competition irrespective of the manner in which the relevant market is delineated.

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Based on the submissions of the Parties with respect to horizontal overlaps it is noted that the end-use for all APIs produced by the Target is export based. Accordingly, the market share of the Target in the Broad as well as each of the Narrow Markets in India is nil. Further, it is noted that the market share of Biocon in the Broad and each of the narrow markets is negligible.

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With respect to potential vertical relationships, it is noted from the submissions of the Parties that the end-use for the APIs produced by the Target is export based and the same are not utilised in the production of formulations that are sold in India. In relation to the downstream markets, it is noted that the market share of Biocon in each of the downstream markets is miniscule. Thus, the Proposed Combination is not likely to raise any competition foreclosure concern in any of the upstream or downstream markets.

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Considering the material on record, including details provided in the notice given under subsection (2) of Section 6 of the Act and assessment of the combination based on the 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 any appreciable adverse effect on competition in India in any of the relevant market(s), and therefore, the Commission approves the same under Section 31(1) of the Act.

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Combination Registration No. C-2024/01/1100

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