CCI Approves Acquisition of 90% Shareholding in Videocon Group of Companies by Twin Star Technologies Limited

On November 9, 2020, CCI approved the acquisition of 99% shareholding by Twin Star Technologies Limited (‘Twin Star’) of 13 companies belonging to the Videocon group, namely, (i) Videocon Industries Limited (‘VIL’); (ii) Videocon Telecommunications Limited (‘VTL’); (iii) Applicomp India Limited; (iv) CE India Limited; (v) Century Appliances Limited; (vi) Electroworld Digital Solutions Limited; (vii) Evans Fraser & Company (India) Limited; (viii) Millennium Appliances (India) Limited; (ix) PE Electronics Limited; (x) SKY Appliances Limited; (xi) Techno Kart India Limited; (xii) Techno Electronics Limited; and (xiii) Value Industries Limited (collectively, ‘Videocon Companies’).^[1]

The notice was filed by Twin Star pursuant to the resolution plan dated November 7, 2020, submitted by it under the Corporate Insolvency Resolution Process (‘CIRP’) of the Videocon Companies.

The ultimate parent entity of Twin Star group is Volcan Investments Limited, which is engaged in: (i) mining and processing of raw materials (such as aluminium, copper, iron ore, zinc, lead, silver, etc.) and steel; (ii) exploration and production of crude oil and natural gas; (iii) generation of power through wind and coal based thermal power generation plants; (iv) providing network solutions through various software solutions and manufacturing of optical fibre performs, fibre cables, etc.; and (v) providing power transmission infrastructure.

Most of the businesses of the Videocon Companies (all of which are undergoing CIRP) are non-functional, i.e., out of 13 Target Companies only three companies, viz. VIL, Value Industries Limited and Techno Electronics Limited continue to make retail sales of certain consumer durables.

Twin Star submitted that the notice had been filed by it as it was the entity that submitted the resolution plan. However, the acquiring vehicle for the proposed transaction is not yet finalised and Twin Star or any of its group companies including a special purpose vehicle set up by any of the entities forming part of the group may implement the resolution plan. Twin Star also submitted that in case the acquiring entity changes, it would inform the CCI of the same (‘Intimation’).

However, the CCI noted that in terms of Regulation 17 of the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (‘Combination Regulations’), proceedings under the Act relating to the combinations stand terminated inter alia upon passing of an order by the CCI under Section 31 of the Act. Accordingly, in the instant case, proceeding under the Act would stand terminated upon passing of this approval order and any Intimation post termination of proceeding, will not be in conformity with Regulation 17 of the Combination Regulations. Further, even though Twin Star in its notice to the CCI, provided an overlap assessment considering all the activities of the Twin Star group, the CCI observed that if acquisition is ultimately done by any jointly controlled entity, overlap assessment with joint controller (not forming part of the Twin Star group) would also need to be done and therefore, giving of notice by one enterprise and actual acquisition by another is not envisaged under the Act. Considering the above, the CCI stated that the present approval order was only in respect of the acquisition by Twin Star.

The CCI noted horizontal overlaps between the Twin Star Group and Videocon Companies through their activities in India in the segments of (i) production and wholesale supply of crude oil; and (ii) production and wholesale supply of natural gas. CCI left the delineation of the relevant market open, as the combination was not likely to cause an AAEC, as for both production and wholesale supply of crude oil; and production and wholesale supply of natural gas, the combined market shares of parties are were minimal and incremental market shares are also insignificant.

Twin Star also identified certain potential vertical relations between activities of Twin Star group and Videocon Companies, but the CCI noted that the potential vertical relations are not such as to raise any competition concern. Accordingly, CCI granted approval.

 

[1] Combination Registration No. C-2020/11/786.