Oct 27, 2023

CCI Approves Acquisition of 59.38% Shareholding in Unichem Laboratories by Ipca Laboratories Subject to Certain Voluntary Modifications

Description of Transaction and Parties

Ipca Laboratories Limited (‘Ipca’) notified the CCI on May 18, 2023, of its acquisition of approximately 59.38% shareholding in Unichem Laboratories Limited (‘Unichem’). The transaction will comprise of two steps: (i) purchase of approx. 33.38% of Unichem’s equity share capital; and (ii) acquisition of the remaining 26% equity share capital pursuant to an open offer (as Unichem is a public listed company and Ipca seeks to acquire > 25% shareholding).

The acquirer – Ipca – is a publicly listed pharmaceutical company engaged in the business of manufacturing formulations and Active Pharmaceutical Ingredients (‘API’) for various therapeutic segments. Ipca also manufactures and sells APIs and intermediates in India. It is present in India through: (i) Ramdev Chemical Private Limited (‘Ramdev’); (ii) Trophic Wellness Private Limited (‘Trophic’); (iii) Avik Pharmaceutical Limited (‘Avik’); (iv) Krebs Biochemicals & Industries Limited (‘Krebs’); and (v) Lyka Labs Limited (‘Lyka’).

The Godha family (comprising Mr. Premchand Godha and his family members) exercises approx. 36.72% shareholding in Ipca. Apart from Ipca, the Godha family is also present in the pharmaceutical sector in India through (i) Makers Laboratories Limited (‘Makers’); (ii) Resonance Specialties Limited (‘Resonance’); and (iii) Kaygee Laboratories Private Limited (‘Kaygee’).

Unichem is also a publicly listed company that is active in the sale of formulations, APIs, intermediates, and contract manufactured finished formulation dosage across the world. In India, the Target is involved in the manufacture of APIs – with physical presence through formulation plants, API plants, and a research centre. Unichem also has an associate company (Synchron Research Services Private Limited) that is engaged in contract research in India.

Overlaps Identified by CCI

Horizontal Overlaps: The CCI identified that the parties were engaged in the business of manufacturing and sale of certain identical/ substitutable APIs in India. As APIs are a primary input and are not substitutable in manufacture of formulations, each API is a separate relevant market. Based on the APIs manufactured and sold by the parties, the CCI identified the broader market as manufacture and sale of APIs in India and narrower markets of manufacture and sale of BFu, HChl, BFlu, MSuc, ABes, QFum, PHyd and Meloxicam in India.

Vertical Overlaps: Certain APIs manufactured by Unichem in India (Amlodipine Besylate (‘ABes’); (ii) Fenofibrate (‘FFrib’); (iii) Lamotrigine (‘LTrig’); (iv) Quetiapine Fumarate (‘QFum’); and (v) Zolpidem Tartrate (‘ZTar’) and purchased by Ipca from third parties can be used by Ipca for the formulations it manufactures. Accordingly, the vertical markets were identified with the manufacture and sale of the relevant API (ABes/FFrib/LTrig/QFum/Ztar) as the upstream market and the manufacture and sale of formulations using the API as the downstream market.

The CCI observed the presence of various factors such as low market share of the parties, low incremental market share as a result of the Transaction, and presence of competitors in the relevant market.

Potential Vertical Overlaps: On potential overlaps between formulations manufactured by the parties and vertical relationship between APIs manufactured by Ipca and the formulations manufactured by the Unichem, Ipca has submitted that: (i) as Unichem is not present in the formulations market in India, there are no horizontal overlaps between the parties’ activities in the formulations market in India; (ii) Ipca is an insignificant player in the formulations market in India; (iii) there are competitors present in the formulations market; and (iv) even considering Unichem’s export volumes as a proxy for its presence in India, it would have hypothetically been an insignificant player in India.

Voluntary Modification

To alleviate any potential competition concerns arising from the Transaction, the parties voluntarily undertook that Unichem would not re-enter the “Indian formulations market” for at least 36 months from the closing date of the transaction.

Based on the voluntary modification and the submission of the parties, the CCI approved the transaction under Section 31(1) of the Competition Act by the order dated July 26, 2023.




These are the views and opinions of the author(s) and do not necessarily reflect the views of the Firm. This article is intended for general information only and does not constitute legal or other advice and you acknowledge that there is no relationship (implied, legal or fiduciary) between you and the author/AZB. AZB does not claim that the article's content or information is accurate, correct or complete, and disclaims all liability for any loss or damage caused through error or omission.