On July 18, 2024, the CCI approved the direct acquisition of Arjas Steel Employee Benefit Trust, Arjas Steel Private Limited (‘ASPL/ Target’) and indirect acquisition and control of Arjas Modern Steel Private Limited (‘AMSPL’) by Sandur Manganese & Iron Ores Limited (‘SMIORE/Acquirer’) and BAG Holdings Private Limited (‘BHPL/Acquirer’) (SMIORE and BHPL are collectively referred to as ‘Acquirers’) ^[1]

Description of Transaction and Parties

On June 5, 2024, the Acquirers filed a Notice before the CCI pursuant to the execution of share purchase agreement (‘SPA’) dated April 25, 2024, entered into between Blue Coral Investment Holdings Pte Ltd. Y CIA SRC (Blue Coral), ASPL, SMIORE and BHPL.

The combination envisages: (i) the acquisition of 80% and 19.12% shareholding of ASPL by SMIORE and BHPL, respectively; and (ii) the indirect acquisition of control of AMSPL by SMIORE and BHPL (‘Proposed Combination’).

Acquirers:

SMIORE: It is a public listed company belonging to the SMIORE group of companies (‘Acquirer Group’), commenced its mining operations (of iron ore and manganese ore) in the year 1954. Since then, SMIORE has diversified into ferroalloys, coke and energy. The energy produced by the Acquirer Group, however, is used purely for captive purposes.

BHPL: It is a private limited company, whose shareholding is held by Bahirji Ajai Ghorpade, the Managing Director of SMIORE, and Vaishnavi Bahirji Ghorpade. Currently, BHPL does not undertake any revenue generating activities in India.

Targets:

ASPL: It is a private company which was incorporated in 1993. ASPL is engaged in the manufacturing and sale of coke, steel products, and heavy ingots. ASPL caters to diverse sectors such as railways, automotive, energy and power, and agriculture. ASPL also exports its products to Africa, Europe and other countries in Asia.

AMSPL: It is a wholly owned subsidiary of ASPL, also engaged in the manufacture and sale of steel products, and heavy ingots. ASPL and AMSPL (collectively referred to as ‘Arjas Group’) also sell unutilised excess quantity of intermediate products, i.e., pig iron and billets, and other related byproducts, to third parties.

Overlaps and Assessment by CCI

The CCI considered the activities of the Acquirer Group, including its affiliates and ASPL and AMSPL and found:

Horizontal Overlaps: SMIORE and ASPL exhibit horizontal overlap in the market segment for production and sale of coke in India.

Vertical Overlaps: The CCI observed the following existing and potential overlaps between parties:

i     Existing Vertical Overlap 1: Production and sale of coke by SMIORE (upstream) and production of steel by ASPL/AMSPL (downstream).

ii.   Existing Vertical Overlap 2: Production and sale of ferroalloys by SMIORE (upstream) and steel production by ASPL/AMSPL (downstream).

iii.  Potential Vertical Overlap: Production and sale of iron ore by SMIORE (upstream) and various steel products by ASPL (downstream).

Assessment:

The CCI found that:

i.     With respect to Horizontal Overlaps: (a) the combined market share of the Acquirer Group and Arjas Group, are in the range of 5-10%; (b) the Acquirer submitted that the Arjas Group consumes ~ 87% of the coke produced by it captively; (c) there is presence of some of the major and established companies in this production and sale of coke in India., e.g. JCL, BLA Coke Private Limited, Saurashtra Fuels Private Limited, Malco Energy Limited, and Vimla Fuels & Metals Private Limited; and (d) there is significant competitive constraints from imports on domestic coke players;

ii.   with respect to Vertical Overlap: (a) the market shares of SMIORE in both the upstream markets is in the range of 0-5%; (b) Arjas Group’s market share in the downstream market lies in the range of 0 -5%; and (c) with respect to the potential vertical overlap, the market shares of SMIORE and Arjas Group in their respective markets are also within the range of 0-5%.

Thus, the CCI concluded that the Proposed Combination is not likely to have appreciable adverse effect on competition in India. Therefore, in absence of any competition concern, the CCI approved the Proposed Combination.

[1] Sandur Manganese & Iron Ores Limited and BAG Holdings Private Limited/Arjas Steel Private Limited (Combination Registration No. C-2024/06/1156).