NewQuest Asia Fund IV (Singapore) Pte. Ltd.

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Page 1 of 8 COMPETITION COMMISSION OF INDIA (Combination Registration No. C-2023/12/1098) 6th February 2024 Notice under Section 6(2) of the Competition Act, 2002 given by NewQuest Asia Fund IV (Singapore) Pte. Ltd. CORAM: Mr. Anil Agrawal Member Ms. Sweta Kakkad Member Mr. Deepak Anurag Member Order under Section 31(1) of the Competition Act, 2002 1. On 28th December 2023, the Competition Commission of India (‘Commission’) received a Notice under Section 6(2) of the Competition Act, 2002 (‘Act’) given by NewQuest Asia Fund IV (Singapore) Pte. Ltd. (Acquirer/TPG NQ). The Notice was filed pursuant to the execution of inter alia (i) Share Purchase Agreement dated 26th September 2023 (SPA) between TPG NQ and Eight Roads Investments Mauritius II Limited (Eight Roads), (ii) Share Subscription Agreement dated 26th September 2023 (SSA) by and amongst TPG NQ, Shadowfax Technologies Private Limited (Target/ SFX), Abhishek Bansal, and Vaibhav Khandelwal, and (iii) Shareholders’ Agreement dated 26th September 2023 (SHA) by and amongst TPG NQ, SFX, Abhishek Bansal, Vaibhav Khandelwal, Nokia Growth Partners IV, LP, Qualcomm Asia Pacific Pte. Ltd., Qualcomm Ventures LLC, Mirae Asset Naver New Growth Fund I, Mirae Asset - GS Retail New Growth Fund I, Mirae Asset - Naver Asia Growth Investment Pte. Ltd, Mirae Asset Late Stage Opportunities Fund, Eight Roads, International Finance Corporation, Flipkart Internet Private Ltd (FK), Trifecta Venture Debt Fund – II, Combination Registration No. C-2023/12/1098 Page 2 of 8 Trifecta Venture Debt Fund – III, Kunal Bahl, Rohit Kumar Bansal, Prashant Malik, and Shruti. 2. The Proposed Combination envisages the acquisition of ~13.24% shareholding (on a fully diluted basis) by TPG NQ in SFX by way of (a) a primary subscription and (b) a secondary acquisition from Eight Roads and certain other shareholders of SFX, along with certain rights, including the right to appoint an observer, a non-executive director, and certain information rights. 3. The Proposed Combination was earlier notified to the Commission in Form I on 29th September 2023 vide Combination Registration No. C-2023/09/1056 (Earlier Notice). Vide letters dated 20th October 2023 and 9th November 2023, issued under Regulation 14(3) of the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (‘Combination Regulations’), the Acquirer was required to furnish the requisite information. The Acquirer submitted its responses on 30th October 2023 and 16th November 2023, respectively. However, the Commission, inter alia, observed that the information provided in the Earlier Notice and responses may not be sufficient to carry out comprehensive analysis, in absence of which, there may be a possibility of an incorrect assessment. It was further noted that the notice had been filed in Form I, and not in Form II, although the combined market shares of the parties in one of the plausible markets identified in the notice could be more than 15 percent after the proposed combination. As per the Regulation 5(3) of the Combination Regulations, notice should preferably have been filed in Form II, to facilitate a detailed competition assessment for determining any likelihood of a proposed combination leading to an appreciable adverse effect on competition in any of the relevant markets that may be impacted by the proposed combination. Accordingly, vide Order dated 29th November 2023, the Commission directed the Acquirer to file a fresh notice in Form II in terms of Regulation 5(5) of the Combination Regulations. In accordance with the directions of the Commission, the Acquirer filed the present Notice. Combination Registration No. C-2023/12/1098 Page 3 of 8 4. In terms of Regulation 14 of the Combination Regulations, the Acquirer was required to provide certain information(s)/clarification(s) relating to the Proposed Combination vide the letter dated 11th January 2024. The response was filed by the Acquirer on 15th January 2024. Parties 5. The Acquirer/TPG NQ is part of a closed private equity fund, managed by TPG NewQuest (formerly known as NewQuest Capital Partners). TPG Inc. (TPG) is the ultimate holding company of the TPG group, to which TPG NQ belongs. TPG NewQuest manages a diversified portfolio of private equity investments across the Asia-Pacific Region, currently managing five funds across five offices in Singapore, Hong Kong, Beijing, Shenzhen, and Mumbai. These include both direct investments that are held and managed by the TPG NewQuest team as well as indirect exposures to companies through fund investments. Portfolio companies operate in a wide range of sectors, with a focus on five core sectors: business services, consumer, financial services, healthcare, and technology, media and telecom (i.e. TMT). TPG including its subsidiaries and affiliates are collectively referred to as the TPG/Acquirer Group. 6. The Target is a crowd-sourced, tech-enabled logistics platform. It has over 3 million delivery partners registered on its platform, serving a diverse set of 200+ enterprise customers across the hyperlocal (deliveries within 30 minutes to 6 hours) and e- commerce (intercity deliveries) segments. Hereinafter, Acquirer/Acquirer Group and Target are collectively referred to as Parties. Competition Assessment 7. Having due consideration to the activities of the Target, which is primarily operating as a third-party logistics service provider, certain affiliate entities of the Acquirer Group in India, meeting the materiality thresholds, become relevant for the purposes of assessment of the Proposed Combination. Busybees Logistics Solutions Private Combination Registration No. C-2023/12/1098 Page 4 of 8 Limited (Xpressbees), a portfolio company of the Acquirer Group in which the Acquirer Group holds 6.5% of shareholding, is engaged in the business of providing logistics and delivery solution services. It is largely earning revenue from supply of express parcel shipping services/e-commerce third-party logistics (3PL) services. Nimbuspost Private Limited (Nimbuspost), a wholly-owned subsidiary of Xpressbees, and its subsidiary Monster Wholesale Private Limited (Monster)1, is engaged in providing tech enabled online logistics aggregation services. Further, another set of Acquirer Group’s affiliate entities: (i) FirstCry; (ii) Cashify; (iii) Livspace; (iv) Reliance Retail; and (v) API Holdings Limited (API) are engaged in online B2B and B2C e-commerce and avail the services of logistic service providers for delivering products to customers/end-consumers. 8. ‘Logistics’ essentially refers to transportation and handling of goods between points of production and consumption (i.e. from the producer to the end-consumer/user). Overall logistics services comprise of the entire range of services offered to transport and handling of a commodity from one point to another. These services also include other value-added and allied services such as warehousing, inventory management, order packing and processing, customs clearance, documentation etc. When outsourced to third-parties, such services are referred to third-party logistics or 3PL services. Third- Party e-commerce logistics (i.e. 3PL services for e- commerce) entail the complete outsourcing of activities associated with the shipping and fulfilment of a commodity order by an e-commerce platform to the 3PL service provider. Once a consumer/business user places an order using an e-commerce platform, the 3PL service provider performs the entire function starting from picking up the order from the seller and delivering it to the buyer. Online logistics aggregation services refer to an online platform that essentially connects the logistics service providers to entities engaged in B2B / B2C sales operating across different business models and sectors, who want to use such logistics services. 1 It has been clarified that presently only Nimbuspost is operational while its subsidiary, Monster, generates almost negligible revenue. Combination Registration No. C-2023/12/1098 Page 5 of 8 9. Considering the overlapping presence of the parties, it is noted that the parties exhibit horizontal overlaps at a broad level for overall logistics services in India. Further, at a narrow level, the parties exhibit horizontal overlaps in the market segment for the provision of 3PL services and at a narrower level in the sub-segment for provision of 3PL services for e-commerce. Further, at the geographic level, the presence of the parties may also be seen at the narrowest level on a tier-wise basis for provision of 3PL services for e-commerce i.e., (i) Metro, (ii) Tier 1, and (iii) Tier 2+ cities. 10. As part of their overall logistics business, the parties also provide warehousing and freight forwarding services, individually to their customers, which leads to additional horizontal overlaps at the narrow level in the market for the provision of warehousing services and the market for the provision of freight services. 11. Besides the horizontal overlaps as specified above, some of the affiliates of the Acquirer, meeting the materiality thresholds, have also been observed to be having vertical linkages with the Target’s presence in the logistics segment. The first vertical linkage arises from the presence of the Target in the broad upstream market for overall logistics services/narrow upstream market for 3PL services for e-commerce in India and the presence of the Acquirer group in the downstream overall market for online B2B and B2C sales in India. The second vertical linkage arises from the presence of the Target in the broad upstream market for overall logistics services/narrow upstream market for 3PL services in India and the presence of the Acquirer group in the downstream market for online logistics aggregation services in India. 12. The Commission assessed the Proposed Combination considering all plausible relevant markets and decided to leave the delineation of the relevant market open as the Proposed Combination, for the reasons detailed in the ensuing paragraphs, is not likely to cause an appreciable adverse effect on competition in any of the plausible alternative relevant markets that could be delineated. 13. Based on the submission of the Parties, it is noted that the combined market shares of the parties in the broad and narrow level of overall logistics services and 3PL services Combination Registration No. C-2023/12/1098 Page 6 of 8 in India respectively are [0-5] %, in terms of value. The combined market share of the parties, in terms of volume, in the narrower level of market for 3PL services for e- commerce in India is in the range of [25-30] % and in the Narrowest tier-wise levels of Metro, Tier 1, and Tier 2+ are [30-35] %, [20-25] % and [25-30] %, respectively. However, it is noted that there are other large players present in the market such as Delhivery and Ecom Express, besides some smaller players that continue to exert competitive constraints on the parties. Further, the incremental change in the level of concentration in these sub-segments does not appear to raise a concern. 14. Further, it is noted that the players in the 3PL services market face high countervailing buyer power. As per the information submitted, the Parties apparently have a high customer concentration in the market segment for 3PL services for e-commerce in India. These customers are primarily e-commerce platforms, including some large e- commerce platforms such as Ajio, Nykaa, Meesho, Flipkart etc. and D2C brands. These e-commerce platforms have tie-ups with multiple 3PL service providers at the same time, wherein allocation happens dynamically from the platforms and switching is very flexible and instantaneous. These platforms provide delivery of their products through several 3PL service providers such as Ecom express, Xpressbees, Delhivery and SFX, apart from few smaller / regional players for services such as warehousing. It has also been observed that while one large common customer contributes a significant percentage of SFX’s revenue and Xpressbees’ revenue in the market for 3PL services for e-commerce in India, the said customer has a balanced wallet share towards all its 3PL services providers. Thus, it is observed that the customers, i.e. the e-commerce platforms, exercise high countervailing buyer power in this market on the 3PL service providers. 15. Thus, in view of the dynamics of the market and totality of factors, inter alia, presence of other credible competitors, high countervailing buyer power, extent of Acquirer’s shareholding and rights in the Target as well as its portfolio entities which have been examined etc., the proposed combination does not appear likely to have any Combination Registration No. C-2023/12/1098 Page 7 of 8 appreciable adverse effect on competition in the 3PL services market segment for e- commerce in India. 16. As regards the market for freight services in India and market for warehousing services in India, it is noted that the combined market shares of the parties, in terms of value, in these market segments are too negligible to warrant any further assessment. 17. With respect to the first vertical linkage, based on the submission of the Parties, it is noted that the market shares of the Target in the narrow upstream market for 3PL services for e-commerce in India, in terms of volume, is [5-10] % and the combined market share of the Acquirer group affiliate entities (through FirstCry, Cashify, Livspace, Reliance Retail, API), in terms of volume, in the downstream market for overall online B2B and B2C sales India is [5-10] %. Further, it is noted that there are other large players present in this downstream market such as Flipkart, Amazon, Meesho, AJIO, Nykaa etc., that procure 3PL services simultaneously from various large 3PL service providers other than the Target, that are present in this upstream market as mentioned above. Therefore, neither the Target nor the Acquirer group seems to have the ability or incentive to cause any foreclosure in their respective markets. 18. As regards the second vertical linkage, it is noted that the market shares of the Target in the narrow upstream market for 3PL services, in terms of value is [0-5] % and market share of Acquirer group affiliate entity (through XpressBees’ subsidiary Nimbuspost) in the downstream market for online logistics aggregation services is [5- 10] %. Further, it is noted that there are other large players present in this downstream market such as Shiprocket (including Pickrr), Shipsy, Shippo etc. that avail 3PL services simultaneously of various large 3PL service providers other than the Target, that are present in this upstream market as mentioned above. Therefore, as regards this vertical linkage also the Parties do not seem to have the ability or incentive to cause any foreclosure in any of the respective markets. Combination Registration No. C-2023/12/1098 Page 8 of 8 19. Considering the material on record, including the details provided in the Notice and the assessment of the Proposed Combination based on the factors stated in Section 20(4) of the Act, the Commission is of the opinion that the Proposed Combination is not likely to have any appreciable adverse effect on competition in India. Therefore, the Commission approves the Proposed Combination under Section 31(1) of the Act. 20. The order may be revoked if, at any time, the information provided by the Acquirer is found to be incorrect. 21. The information provided by the Acquirer shall be treated as confidential in terms of and subject to provisions of Section 57 of the Act. 22. The Secretary is directed to communicate to the Acquirer accordingly.