CCI Approves Collective Acquisition of Ruchi Soya Industries Limited by Patanjali Ayurved Limited, Divya Pharmacy, Patanjali Parivahan Private Limited and Patanjali Gramodhyog Nyas

On March 6, 2019, CCI approved the acquisition of the majority of equity share capital of Ruchi Soya Industries Limited (‘RSIL’) by Patanjali Ayurved Limited (‘PAL’), Divya Pharmacy (‘Divya Pharmacy’), Patanjali Parivahan Private Limited (‘PPPL’) and Patanjali Gramodhyog Nyas (‘Patanjali Gramodhyog’) (‘Proposed Combination’).[1] PAL, Divya Pharmacy and PPPL are together referred to as ‘Patanjali’. Patanjali and RSIL are together referred to as ‘Parties’. The notice to CCI was filed in pursuance to the resolution plan dated May 2, 2018 submitted by Patanjali in relation to RSIL, which is presently undergoing corporate insolvency resolution process initiated under the Insolvency and Bankruptcy Code, 2016.

PAL is a diversified consumer good company engaged, inter alia, in the manufacture and marketing of ayurvedic and medicinal products, food products, breakfast cereals, dairy products, edible oil, packaged water and beverages. Divya Pharmacy is present in the business of Ayurvedic formulations as well as therapeutic segments, including the manufacture of traditional medicine. PPPL is a logistics services entity which provides transportation and logistics services on a captive basis to various entities within the Patanjali group. Patanjali Gramodhyog is engaged in developing products and facilities for cattle welfare. On the other hand, RSIL is engaged in the business of manufacture and marketing of edible oils, soya foods and oil derivatives.

CCI observed that the activities of Patanjali and RSIL overlap horizontally in the market for sale of: (i) edible oils; and (ii) soya foods. Within the broader soya foods market, Patanjali and RSIL overlap horizontally in the following products: soyabean oil, sunflower oil, mustard oil and rice bran oil. For the purpose of the assessment, these by-products were also classified as separate sub-segment as there is limited degree of substitutability considering the difference in usage, cooking pattern etc. In this regard, it was stated by Patanjali that the Parties exhibit horizontal overlap in the market for sale of soya chunks/ granules.

CCI also observed that PAL and RSIL have entered into various packing and processing agreements for edible oil because of which there may be potential vertical overlaps between the Parties in the following areas i.e., (i) supply of soya flour (upstream) and manufacturing of soya chip/katories (downstream); (ii) supply of oleo chemicals (upstream) and manufacturing of bathing soap (downstream); and (iii) supply of bakery fats (upstream); and manufacturing of biscuits (downstream). CCI did not, however, delineate a relevant market observing that the Proposed Combination was unlikely to cause an AAEC in any of the possible alternative relevant markets that may be delineated.

Having regard to: (i) the market share of the Parties in broader segments of edible oils and soya foods as well as in the sub-segments of soyabean oil, sunflower oil, mustard oil and rice bran oil; (ii) fragmented nature of Indian edible oils market; (iii) the presence of a number of organized as well as local and unorganized players in the Indian edible oils market; (iv) low entry barriers; and (v) high reliance on imports, CCI approved the Proposed Combination. CCI noted that the existing and potential vertical relationships between the Parties were unlikely to cause any concerns due to the lack of ability and incentive to foreclose competition in any of the markets by the Parties.

[1] Combination Registration No. C-2019/01/631