1. Protos Engineering Company Private Limited 2. Paharpur Cooling Towers Limited

CCI16 Apr 2024C-2024/02/1112

Case brief

AI extract

What is this about?

The Competition Commission of India examined a Notice under Section 6(2) of the Competition Act, 2002 filed by Protos Engineering and Paharpur Cooling Towers regarding their acquisition of shares in Thyssenkrupp Industries India. The Commission found no horizontal or vertical overlaps that would foreclose competition and approved the combination.

What did the court decide?

The Proposed Combination is approved under Section 31(1) of the Act, subject to confidentiality provisions and the right to revoke if information is found incorrect.

1. Protos Engineering Company Private Limited 2. Paharpur… — Company and Corporate | CCI (2024)

¶1

COMPETITION COMMISSION OF INDIA Combination Registration No. C-2024/02/1112

¶2

16^th April 2024

¶3

Notice under Section 6(2) of the Competition Act, 2002 jointly given by Protos Engineering Company Private Limited and Paharpur Cooling Towers Limited

¶4

CORAM:

¶5

Ms. Ravneet Kaur Chairperson

¶6

Mr. Anil Agrawal Member Ms. Sweta Kakkad Member

¶7

Mr. Deepak Anurag Member

¶8

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

¶9

On 16^th February 2024, the Competition Commission of India (‘ Commission ’) received a notice (‘ Notice ’) under sub-section (2) of Section 6 of the Competition Act, 2002 (‘ Act ’) jointly given by Protos Engineering Company Private Limited (‘ Protos ’) and Paharpur Cooling Towers Limited (‘ Paharpur ’) [Hereinafter, Protos and Paharpur are collectively referred to as the ‘ Acquirers ’]. The Notice was filed pursuant to the execution of the Share Purchase Agreement dated 22^nd January 2024 between Thyssenkrupp Technologies Beteiligungen GmbH (‘ Seller 1 ’) and Acquirers (‘ SPA 1 ’), and the Share Purchase Agreement dated 19^th January 2024 between Mr. Jayprakash Jagannath Girme (‘ Seller 2 ’) and Acquirers (‘ SPA 2 ’).

¶10

Page 1 of 7

¶11

Combination Registration No. C-2024/02/1112

¶12

The Proposed Combination envisages the additional acquisition, on a fully diluted basis, of:

¶13

a) 10.088% and 0.112% of total paid-up share capital of Thyssenkrupp Industries India Private Limited (‘ Target ’) by Protos from Seller 1 and Seller 2, respectively.

¶14

b) 44.639% and 0.446% of total paid-up share capital of the Target by Paharpur from Seller 1 and Seller 2, respectively.

¶15

As a result of the Proposed Combination, Seller 1 and Seller 2 will cease to be shareholders of Target.

¶16

In terms of Regulation 14 of the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011, vide letter dated 29^th February 2024, certain information and clarifications were sought from the Acquirers. The Acquirers submitted the response to the same vide communication dated 13^th March 2024, after seeking an extension of time. Since the response was not complete, another letter dated 19^th March 2024 was issued and the response to the same was furnished vide communication dated 26^th March 2024. The Acquirers also furnished certain information voluntarily vide communication dated 9^th April 2024.

¶17

Protos, a private company incorporated in India, is directly and indirectly owned and controlled by the Kapadia family. Certain Kapadia family members and Harshadray Private Limited constitute the Protos Group. Protos is engaged in the following activities:

¶18

a) acts as an agent of companies that manufacture: (i) equipment, machinery, and raw materials in the steel, power, sugar, cement, fertilizer, oil and gas, plastic, solar water purification, and petrochemicals sectors, etc. and (ii) industrial products such as densolen tapes, die casting machine, etc.

¶19

b) acts as a sole selling agent for Target with respect to the latter’s sugar equipment/plant.

¶20

c) provides after-sales services in relation to the erection and commission of pneumatic tube systems, die casting machines, and densolen tapes.

¶21

Page 2 of 7

¶22

Combination Registration No. C-2024/02/1112

¶23

One of the affiliates of Protos Group namely, TUV India Private Limited (‘ TUV India ’) is engaged in providing services, inter alia, relating to industrial inspection, industrial certification, food testing to consumer companies, oil & gas testing to transport companies and electric & electronic testing.

¶24

Paharpur, a public limited company incorporated in India, is directly and indirectly, owned and controlled by the members of the Swarup family. Paharpur Group is comprised of the Swarup family and their relevant entities. Paharpur is engaged in the manufacture and sale of industrial cooling systems (‘ ICS ’) and the generation of power (through wind) in India.

¶25

Two affiliates of Paharpur Group are KSB Limited and KSB MIL Controls Limited (‘ MIL Controls ’). KSB Limited is engaged in the manufacture and sale of industrial valves, industrial pumps, and pump control units. MIL Controls is engaged in the manufacture and sale of industrial valves and accessories.

¶26

Target, a private company incorporated in India, is jointly controlled by Seller 1, Protos Group, Paharpur Group, and group of Mr. Arvind Parikh. Target is engaged, inter alia, in:

¶27

a) providing engineering; engineering and procurement; and engineering, procurement, and construction services to execute turnkey projects from conceptualization to finalisation relating to sugar, mining, cement, and power sectors. It also provides after-sales services.

¶28

b) manufacture and sale of various industrial products to customers in India and globally i.e., centrifugal machines, mineral and aggregating crushing systems, and vertical shaft impactors.

¶29

c) providing operation and maintenance/asset management services for plants.

¶30

It is submitted by the Acquirers that ICS is the process cooling system to remove excess heat from any medium, using heat exchange with water or air to bring down the temperature of that medium towards ambient levels. They are required in industries

¶31

Page 3 of 7

¶32

Combination Registration No. C-2024/02/1112

¶33

where process heat is generated such as power, refineries, cement, chemical & fertilizer, sugar, oil & gas, mining, etc. for cooling purposes. They are essential to the production process as they prevent equipment and products from overheating by transferring the thermal energy (heat) generated, from one medium to another.

¶34

As submitted in the Notice, ICS may be segmented based on the cooling technique into dry industrial cooling systems (‘ DCS ’), wet industrial cooling systems (‘ WCS ’), and hybrid industrial cooling systems (‘ Hybrid ICS ’). DCS makes use of air for cooling and is used when the availability of water resources are limited. WCS makes use of water for cooling and is used for large industries which require extensive cooling and have sufficient availability of water. Hybrid ICS combines both cooling technologies (wet and dry cooling) to achieve optimal cooling efficiencies. ICS and its abovementioned segments may be segmented into the Engineering, Procurement, and Construction (‘ EPC ’) Model and Non-EPC (Standard) Model based on the supply model. Under the EPC Model, the ICS manufacturer engages in designing and engineering of cooling equipment or procurement of the same; and undertaking civil construction to erect the ICS at the customer location/plant. These are typically undertaken for large projects such as setting up a power plant or captive power plant while setting up another plant, oil refinery, etc. On the other hand, under the Non-EPC Model, the ICS manufacturer supplies standard products to its customers, which are typically used for small projects generating less heat such as kilns in a cement plant or centralised cooling systems installed at an airport, commercial buildings, data centres, hospitals, hotels, etc.

¶35

Paharpur is engaged in the manufacture and sale of ICS including WCS and DCS under both supply models, excluding non-EPC DCS products. Further, it is present only in the sale of non-EPC Hybrid ICS, which are procured by it from overseas manufacturers and supplied to the customer in India.

¶36

With regard to the EPC activities of the Target, it is submitted that EPC firms deliver a complete package of resources from designing the plant to supply, construction, and commissioning of the complete plant. EPC projects can be undertaken for multiple

¶37

Page 4 of 7

¶38

Combination Registration No. C-2024/02/1112

¶39

industries. However, an EPC contractor providing services to a particular sector requires significant capabilities i.e., the necessary engineering, technology, technical know-how, expertise, and machinery. For every sector, an EPC contractor requires separate know-how and technology as the machinery/equipment/technology used is sector-specific. It is submitted that Target is engaged in the provision of EPC services to the sugar, mining, cement, and power industries only as it does not have the capabilities to cater to other sectors.

¶40

Based on the submissions in the Notice, it is observed that there are no horizontal overlaps between the Target and the Acquirers.

¶41

Based on the activities of Paharpur/Paharpur Group (including their affiliates) and Target (including its downstream affiliates), the Commission noted that the product/services of these parties currently exhibit the following vertical overlaps/linkages:

¶42

a) manufacture and sale of ICS in India ( upstream market ) by Paharpur and provision of EPC services in India ( downstream market ) by the Target,

¶43

b) manufacture and sale of industrial valves in India ( upstream market ) by Paharpur (through KSB Limited and MIL Controls) and provision of EPC services in India ( downstream market ) by Target, and

¶44

c) manufacture and sale of industrial pumps in India ( upstream market ) by Paharpur (through KSB Limited) and provision of EPC services in India ( downstream market ) by Target.

¶45

Based on the activities of Protos/Protos Group (including their affiliates) and Target, the Commission noted that the products/services of these parties currently exhibit the following complementary overlaps:

¶46

a) provision of industrial inspection services by TUV India and provision of EPC services in India by the Target and

¶47

b) provision of industrial certification services by TUV India and provision of EPC services in India by Target.

¶48

Page 5 of 7

¶49

Combination Registration No. C-2024/02/1112

¶50

Additionally, there is an existing supply arrangement between Protos Group and Target as Protos is the sole selling agent of Target for its EPC business relating to the sugar sector.

¶51

The Commission decided to leave the delineation of the relevant market open, as it was observed that the Proposed Combination is not likely to cause any appreciable adverse effect on competition in any of the plausible relevant market(s) in India.

¶52

With regards to the presence of Paharpur Group in the upstream market for the manufacture and/or sale of ICS, based on the submission of the Acquirers, the Commission noted that the market share is in the range of [10-15]%. With regards to sub-segments of ICS, the market share of Paharpur is in the range of [5-10]% for DCS and EPC DCS segments; in the range of [10-15]% for WCS, EPC ICS, EPC WCS and Non-EPC Hybrid segments; and in the range of [15-20]% for Non-EPC ICS and NonEPC WCS segments. Further, the market share of Paharpur in the upstream market of manufacture and sale of industrial valves and industrial pumps is in the range of [0-5]% and [5-10]%, respectively.

¶53

With regards to the presence of Protos Group in the market for the provision of industrial inspection services and industrial certification services, based on the submission of the Acquirers, the Commission noted that the market share is in the range of [5-10]%, for both these services. Further, the existing supply relationship between Protos as an agent of Target in the sugar sector is not such as to cause any foreclosure concerns.

¶54

Based on the submissions of the Acquirers, the Commission noted that the market share of the Target is in the range of [0-5]% in the market for the provision of EPC services and its segments of EPC services in sugar, cement, mining and power sectors.

¶55

Based on the foregoing, it appears that the Proposed Combination is not likely to foreclose competition in any market in India.

¶56

Page 6 of 7

¶57

Combination Registration No. C-2024/02/1112

¶58

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.

¶59

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

¶60

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

¶61

The Secretary is directed to communicate to the Acquirers accordingly.

¶62

Page 7 of 7

1. Protos Engineering Company Private Limited 2. Paharpur Cooling Towers Limited

Case brief

What is this about?

What did the court decide?

1. Protos Engineering Company Private Limited 2. Paharpur Cooling Towers Limited

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

Case details

Similar cases