Background

On September 20, 2023, the CCI approved a Proposed Combination comprising the acquisition of: (i) up to approximately 20% of the unitholding of Highways Infrastructure Trust (‘Target Trust’ / ‘Target 1’) by 2452991 Ontario Limited (‘OTPP 1/ Acquirer 1’), taken together with the existing unitholding of OTPP 1 in the Target Trust; and (ii) approximately 20% equity share capital of Highway Concessions One Private Limited (‘HC One’/ ‘Target 2’) by 2743298 Ontario Limited (‘OTPP 2’ / ‘Acquirer 2’) [(OTPP 1 and OTPP 2 collectively referred to as  ‘Acquirers’ and Target 1 and Target 2 are collectively referred to as ‘Targets’) (Targets Acquirers are collectively referred to as ‘Parties’) (‘Proposed Combination’). ^[1]

Parties to Combination

Acquirer 1: OTPP 1 is an investment holding company and currently owns 7.51% unitholding in Target Trust. OTPP 1 does not carry out any business operations in India or worldwide. Further, the OTPP 1 does not have any direct or indirect subsidiaries or any registered office in India.

Acquirer 2: OTPP 2 is an investment holding company, holding a 60% stake in Green Energy Infra Project Managers Private Limited (‘Green Energy’), which is a newly incorporated Indian entity that is yet to commence operations and currently does not hold any assets. OTPP 2 does not carry out any business operations in India or worldwide. Further, OTPP 2 does not have any direct or indirect subsidiaries or any registered office in India.

The Acquirers are solely controlled by the Ontario Teacher’s Pension Plan Board (‘OTPPB’). OTPPB is concerned with the administration of pension benefits and the investment of pension plan assets of active and retired teachers in the Canadian province of Ontario. OTPPB and its affiliates have made investments in the operation of road concessions in India, especially in National Highways Infra Trust (‘NHIT’), National Investment and Infrastructure Fund (‘NIIF’) and NIIF’s investment manager National Investment and Infrastructure Fund Limited (‘NIIFL’).

Target 1: Target Trust is an Indian infrastructure investment trust registered with Securities and Exchange Board of India (‘SEBI’) under the SEBI (Infrastructure Investment Trusts) Regulations, 2014 (‘SEBI InvIT Regulations’). The Target Trust owns special purpose entities incorporated in India, engaged in the business of operating (through governmental concessions) roads and highways in India.

Target 2: HC One is a private limited company incorporated in India with its business activities solely in India. It is a wholly owned subsidiary of Galaxy II which is a 100% subsidiary of Galaxy Investments Pte. Ltd. which in turn is majority owned and controlled by KKR Asia Pacific Infrastructure Holdings Pte. Ltd. It operates as the investment manager of the Target Trust, that manages and operates roads assets held directly or indirectly by the Target Trust, undertaking activities in accordance with the SEBI InvIT Regulations.

Relevant Markets and Overlaps

The CCI based on past precedent identified the relevant market where overlaps existed as the market for ‘Operations and Maintenance (O&M) of highways in the road infrastructure sector in India’.  In this regard the CCI noted that:’(i) OTPPB’s road assets^[2] investments and Target Trust’s road assets investments both engage in provision of O&M services for highways in the road infrastructure sector; (ii) however, the O&M services provided are captive in nature (i.e., OTPPB assets provide O&M only for their own roads and Target Trust assets provide O&M only for their own roads); (iii) neither provide O&M services to third parties or engage third parties for providing O&M services for their own roads; (iv) while both entities are present in O&M services for highways, there is no competitive overlap as the services are captive and limited to their own road assets; (v) neither the Acquirers nor the investee entities of the Acquirer and the group to which the Acquirers belong i.e., OTPPB (and its portfolio entities) are involved in activities or manufacture of products which are used as inputs to build and operate road assets in India; and (vi) OTPPB (and its Portfolio Entities) do not have any vertical or complementary overlaps with the business activities of (a) the Target Trust’s road assets; and (b) HC One.

Competitive Assessment

The CCI approved the Proposed Transaction concluding that it was not likely to have an appreciable adverse effect on competition in India for the following reasons: (i) the combined as well as incremental market share of the Parties in the market for O&M of highways in the road infrastructure sector in India is in the range of 0-5 % only; and (ii) there are other players present in the market.

[1] 2452991 Ontario Limited and 2743298 Ontario Limited (Combination Registration No.C-2023/08/1046).

[2] The road asset (excluding structures) includes more than just the pavement; it also includes earthworks, drainage, safety barriers, lighting, signs, lines and the soft estate (grassland, trees and shrubs.)