UltraTech Cement Limited

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Page 1 of 18 COMPETITION COMMISSION OF INDIA (Combination Registration No. C-2024/09/1185) 20th December 2024 Notice under Section 6(2) of the Competition Act, 2002 given by UltraTech Cement Limited CORAM: Ms. Ravneet Kaur Chairperson Mr. Anil Agrawal Member Ms. Sweta Kakkad Member Mr. Deepak Anurag Member Order under Section 31(1) of the Competition Act, 2002 I. Background 1. On 12th September 2024, the Competition Commission of India (Commission) received a Notice under Section 6(2) of the Competition Act, 2002 (Act), given by UltraTech Cement Limited (Acquirer/UltraTech) in relation to UltraTech’s proposed acquisition of: (i) 32.72 percent of the paid-up equity share capital of The India Cements Limited (India Cements/Target) by way of the Primary Acquisition (as defined below), and (ii) up to 26 percent of the paid-up equity share capital of India Cements by way of the Open Offer (as defined below) [Proposed Combination]. 2. The Primary Acquisition involves: (i) acquisition of equity shares representing 21.98 percent of the total equity share capital of India Cements from EWS Finance & Investments Private Limited, Combination Registration No. C-2024/09/1185 Page 2 of 18 Srinivasan N, Chitra Srinivasan, Rupa Gurunath and S.K. Asokh Baalaje, who are the promoters and members of the promoter group of India Cements, by way of share purchase agreement dated 28th July 2024 (SPA 1) executed amongst UltraTech, EWS Finance & Investments Private Limited, Srinivasan N, Chitra Srinivasan, Rupa Gurunath and S.K. Asokh Baalaje; (ii) acquisition of equity shares representing 6.44 percent of the equity share capital of India Cements from Rupa Gurunath, Trustee of Security Services Trust and Rupa Gurunath, Trustee of Financial Service Trust, who are members of the promoter group of India Cements, by way of share purchase agreement dated 28th July 2024 (SPA 2) executed amongst UltraTech; Rupa Gurunath, Trustee of Security Services Trust; and Rupa Gurunath, Trustee of Financial Service Trust; and (iii) acquisition of equity shares representing 4.30 percent of the equity share capital of India Cements from Sri Saradha Logistics Private Limited, by way of share purchase agreement dated 28th July 2024 (SPA 3) executed between UltraTech and Sri Saradha Logistics Private Limited. (Hereinafter, SPA 1, SPA 2 and SPA 3 are collectively referred to as “Transaction Documents”) 3. The execution and signing of the Transaction Documents attract the provisions of Regulations 3(1) and 4 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, as amended (SAST Regulations), to launch an “open offer” by UltraTech. Accordingly, UltraTech has launched an open offer to the public shareholders of India Cements to acquire equity shares constituting up to 26 percent of the equity share capital of India Cements (Open Offer). 4. In terms of Regulation 14 of the Competition Commission of India (Combinations) Regulations, 2024 (Combination Regulations), vide letter dated 26th September 2024 (RFI 1), the Acquirer was required to provide certain information/document(s) by 3rd Combination Registration No. C-2024/09/1185 Page 3 of 18 October 2024. The Acquirer filed its reply on 14th October 2024, after seeking extension of time (Response 1). As certain defects and discrepancies were observed on examination of Response 1, vide letter dated 21st October 2024, in continuation of RFI 1 and Response 1 (RFI 2), the Acquirer was again asked to remove defect(s), explain discrepancies and furnish requisite information by 28th October 2024. The Acquirer filed its reply on 11th November 2024, after seeking extension of time (Response 2). II. Parties to the Combination 5. UltraTech, a public listed company, is a subsidiary of Grasim Industries Limited (Grasim). Both Grasim and UltraTech are flagship companies of the ‘Aditya Birla conglomerate’. UltraTech is engaged in the manufacture of grey cement, white cement, ready mix concrete (RMC), clinker, building products and provision of building solutions in India. As submitted, as of 30th June 2024, UltraTech has an installed capacity of 149.46 MTPA of grey cement in India and post the acquisition of Kesoram Cement Business, UltraTech will have an installed capacity of 160.21 MTPA of grey cement in India1. 6. India Cements, a public listed company, is, inter alia, engaged in the manufacture and sale of grey cement and RMC in India. As submitted, India Cements has a total of nine (9) grey cement plants with a total capacity of manufacturing 14.45 MTPA of grey cement in India. III. Notice under Section 29(1) of the Act 7. The Commission considered the activities of UltraTech and India Cements and identified overlapping product segments of cement and RMC as relevant for competition assessment. 1 Kesoram Cement Business includes an integrated grey cement unit located at Sedam, Karnataka (having an installed capacity of 9 MTPA) and an integrated grey cement unit located at Basantnagar, Telangana (having an installed capacity of 1.75 MTPA). The acquisition of Kesoram Cement Business by UltraTech (Kesoram Acquisition) was notified and was approved by the Commission vide its order dated 19th March 2024 (Kesoram Approval Order). As submitted, the NCLT approval for the same was pending on the date of filing of Notice. Combination Registration No. C-2024/09/1185 Page 4 of 18 8. The Commission, in its meeting held on 3rd December 2024, considered the information on record, details provided in the notice and the responses filed by the Acquirer, and formed a prima facie opinion that the Proposed Combination is likely to cause an appreciable adverse effect on competition (AAEC) in a relevant market for grey cement delineated for the purpose of assessment of the Proposed Combination. Accordingly, in terms of Section 29(1) of the Act, a show-cause notice dated 5th December 2024 (SCN) was issued to the Acquirer, wherein the Acquirer was directed to respond in writing, within 15 days of the receipt of the SCN, as to why investigation in respect of the Proposed Combination should not be conducted. 9. The Acquirer filed the response to the SCN on 16th December 2024 (Response to SCN). As part of Response to SCN, the Acquirer also requested for an opportunity to present its case by way of an oral hearing. The request of the Acquirer was granted, and the Commission heard the Acquirer at length on 19th December 2024 (Oral Hearing). 10. Thereafter, the Commission, in its meeting held on 20th December 2024, considered and assessed the Proposed Combination. Considering the material on record, including the Response to SCN, the submissions made by the Acquirer during the Oral Hearing and factors provided under Section 20(4) of the Act, the Commission formed the opinion that the Proposed Combination is not likely to have AAEC in India and accordingly, decided to approve the same under Section 31(1) of the Act. The analysis and findings of the Commission in respect of competition assessment of the Proposed Combination are given hereunder. IV. Competition Assessment - Cement Relevant Product Market 11. The Commission noted that there are two varieties of cement, i.e., grey cement and white cement. Within the category of grey cement, there are different variants of cement such as Ordinary Portland Cement, Portland Pozzolona Cement, Portland Slag Combination Registration No. C-2024/09/1185 Page 5 of 18 Cement etc. As regards the variants of grey cement, the Commission, in its earlier decisions2, has noted that different varieties of grey cement are considered to be largely interchangeable. The white cement is considered to constitute a different market, basis its characteristics, price and intended use. However, as stated in the notice, India Cements has neither manufactured nor sold white cement post FY 2020 and does not intend to manufacture and/or sell white cement in the future. Accordingly, the relevant product market for the purposes of assessment of the Proposed Combination is defined as the market for grey cement. Relevant Geographic Market(s) 12. As regards the relevant geographic market(s), the Commission in its earlier decisions3, has noted that cement being a bulk commodity, involves significant transportation costs and, therefore, the consumption of cement is generally centred around production clusters and from the perspective of demand and supply, these self-contained areas, having homogeneous conditions of competition, constitute distinct relevant geographic markets for the purposes of competition assessment of a combination. 13. For the purposes of identification of the area that would form part of the relevant geographic market, the Commission, in its decisional practice, has been using the shipments test as postulated by Elzinga and Hogarty (EH Test) and the catchment area analysis. The EH Test aims to identify the areas which can be considered as self- contained and have homogeneous conditions of competition based on the extent of flow of product into/outside a given geographic area. With regards to the thresholds of LIFO (Little In From Outside) and LOFI (Little Out From Inside), what constitutes ‘little’, generally, 25 percent is considered a weak threshold and 10 percent is considered a strong threshold. 2 C-2013/10/135 - UltraTech/Jaypee; C-2014/07/190 – Holcim Limited/Lafarge S.A; C-2015/02/246 – UltraTech/Jaypee; C-2015/08/300 - HeidelbergCement AG; C-2016/04/394 – UltraTech/Jaypee; C-2018/05/575 – UltraTech/Century; C-2024/01/1106 – UltraTech/Kesoram Cement Business and others. 3 Ibid Combination Registration No. C-2024/09/1185 Page 6 of 18 14. For the purposes of EH Test, the industry dispatch data is required. However, as the Cement Manufacturers Association last published the industry cement dispatch data for the year 2011-12, no data is available for subsequent periods. Accordingly, the parties have now been applying EH Test in a modified manner considering their actual inter-state despatch of cement as a proxy for industry data (Modified EH Test). However, as regards the Modified EH Test, the Commission in its decisional practice has observed that the underlying assumptions in the Modified EH Test may not yield a good proxy of the industry-wide cement inter-state dispatch patterns. 15. Apart from the industry wide dispatch data, the second requirement of EH/Modified EH Test is the choice of appropriate threshold. As regards the question of threshold, the Commission has consistently maintained that regardless of the choice of threshold level, there should be sufficient cause in terms of the qualitative competitive constraints for inclusion of an additional state/area in the relevant geographic market and that the said test should be applied in a manner that ensures that the market definition arrived at reflects the most relevant constraints faced by the parties to a combination. 16. Another approach which is used and has been used by the Commission in its decisional practice for delineating relevant geographic market(s) is the catchment area analysis. Catchment area means the geographical area from which a firm primarily draws its customers or can potentially draw its customers. The delineation of catchment area of a cement plant also requires consideration of certain threshold on the aforesaid lines as the EH Test. Further, catchment area analysis can be delineated in terms of actual areas being supplied by the relevant plant (Actual Dispatch Based Catchment Area) and also in terms of ‘potential’ catchment area based on radial distance over which the cement dispatches for the decided threshold are made (Dispatch Distance Based Catchment Area). Again, both the Actual Dispatch Based Catchment Area and Dispatch Distance Based Catchment Area have their own merits and limitations. While Actual Dispatch Based Catchment Area approach emphasizes assessment of impact of a proposed combination on the areas actually served by the plants of target enterprise, the Dispatch Distance Based Catchment Area emphasises the potential competition aspect. Combination Registration No. C-2024/09/1185 Page 7 of 18 17. Given the aforementioned, the assessment and findings on relevant market(s) need to account for the specificities of the markets under assessment, for example, the dynamics of location of cement production clusters in India and the consumption centres these clusters are most likely to serve considering the transportation costs involved for delineation of relevant geographic market(s). As submitted by the Acquirer, logistics cost forms 25 percent -30 percent of the overall cost of grey cement manufacturing and hence is a major factor of consideration for selecting the location of the plants. Thus, the broader and wider market would imply movement of cement by incurring a higher logistics cost and the same is a competitive disadvantage. Further, given the geographic distribution of cement clusters in India, this factor assumes even more relevance. To illustrate, while a plant may be shipping cement over 500 kms in a particular area or direction, its ability to effectively ship in a manner so as to pose any competitive constraints on other competitors becomes limited by presence of other cement clusters and thus shipping over a particular distance may not imply competition efficacy. Accordingly, the Commission has always emphasised the need for consideration of various factors holistically rather than treating different approaches in isolation or applying the tests rigidly where meeting the specific threshold becomes the sole objective. Instead, the factors should serve as a tool to delineate a market which best reflects the competitive landscape relevant to the assessment of a transaction. 18. As regards the catchment area analysis, the Commission observed that the Acquirer has undertaken the same considering a distance-based approach instead of considering the actual dispatch areas. The Commission is of the view that though the Distance Based Catchment Area is of relevance for assessment of impact of a transaction on potential competition and potential overlaps, the same needs to be supplemented with Actual Dispatch Based Catchment Area so as to allow a realistic as well as holistic assessment of the impact of any proposed combination on the dynamics of areas catered by the plants of Target. 19. In the aforesaid backdrop, the Commission considered the question of delineation of relevant geographic market(s) for the purpose of assessment of the Proposed Combination Registration No. C-2024/09/1185 Page 8 of 18 Combination. The Commission observed that UltraTech and India Cements have an overlapping plant presence in the States of Andhra Pradesh (AP), Telangana (TNA), Tamil Nadu (TN), and Rajasthan (RJ) and relevant geographic market(s) are to be delineated accordingly. 20. As regards the relevant geographic market for the State of RJ, the Commission observed that India Cements’ presence in RJ is limited to only having a single grey cement plant with a capacity of 1.5 MTPA. Considering the installed capacity of all the grey cement manufacturers in the narrowest frame of reference viz., RJ as of FY 2025 (actuals + projected) being 95.3 MTPA, the same implies an insignificant increment of less than 2 percent in the presence of the resulting entity in RJ. Accordingly, the Commission is of the opinion that the Proposed Combination is not likely to have an AAEC in any of the plausible relevant markets that can be delineated with respect to the overlap in RJ and accordingly further assessment is not considered as required and the question of exact delineation of relevant market can be left open. 21. The remaining geographical overlaps in the States of AP, TN and TNA were considered further for delineation of relevant geographic market(s) and assessment of the Proposed Combination for likelihood of AAEC. 22. In terms of Modified EH Test applied by UltraTech upon individually taking the base State as the States in which India Cements has grey cement plants in Southern India – i.e., the States of AP, TN and TNA, UltraTech arrived at the broad relevant geographic market comprising the States of AP, TNA, TN, Karnataka (KTK) and Maharashtra (MH) (South Broad Relevant Market). Upon taking the base State individually as the States of AP and TNA, UltraTech arrived at the narrow relevant geographic market comprising the States of AP, TNA, KTK and MH (AP/TNA Narrow Relevant Market). Upon taking the base State as the State of TN, UltraTech arrived at narrow relevant geographic market comprising the States of TN, AP, KTK and MH (TN Narrow Relevant Market). Combination Registration No. C-2024/09/1185 Page 9 of 18 23. For the purpose of catchment area analysis, the Acquirer proposed consideration of Dispatch Distance Based Catchment Area and submitted that grey cement transportation via land is generally at a distance of 400 kms - 500 kms from any plant site4. On the same basis, following catchment areas were delineated by the Acquirer for each of the plants of India Cements: (i) For Chilamkur and Yerraguntla plants of India Cements located in AP, the catchment area was proposed as comprising the parts of States of AP, MH, TNA, KTK, TN and Kerala (KR). (ii) For Vallur (TN) plant, the catchment area was proposed as comprising the part of States of AP, TNA, KTK, TN and KR. (iii) For Dalavoi and Sankari (TN) plants, the catchment area was proposed as comprising the part of States of AP, TN, KTK and KR. (iv) For Sankarnagar (TN) plant, the catchment area was proposed as comprising the part of States of TN and KR (v) For Vishnupuram (TNA) plant, the catchment area was proposed as comprising the part of States of AP, MH, TNA and KTK; and (vi) For Malkapur (TNA) plant, the catchment area was proposed as comprising the part of States of AP, MH, TNA, KTK and TN. 24. The Commission considered the plausible relevant market(s) as proposed by the Acquirer. The Commission observed that in terms of significance of trade flows, while the inclusion of KTK, MH, and TNA to AP appears justified, inclusion of TN in the same market appears to be artificially broadening the relevant geographic market. The observation was based on insignificant exports to TN from the area comprising KTK, AP, MH and TNA. The trade linkage of TN with AP, KTK, MH, and TNA was also tested for reverse flows i.e., exports from TN to the area comprising States of AP, KTK, MH, and TNA. As observed, plants located in TN also export less than 5 percent of total production to the area comprising AP, KTK, MH and TNA. 4 As submitted, around 85 percent of grey cement is dispatched at pan India level by UltraTech and India Cements within 500 kms distance. Combination Registration No. C-2024/09/1185 Page 10 of 18 25. The Commission further undertook Actual Dispatch Based Catchment Area Analysis in terms of actual dispatches made by India Cements over the period FY 2022 to FY 2024. Based on the same, the Commission noted that three of the four plants of India Cements located in AP/TNA do not include TN in their catchment area even at 90 percent threshold. Only one plant includes TN as part of its catchment area and that too at a 90 percent threshold. While on one hand, the catchment areas imply lack of relevance of TN in the AP/TNA market, on the other hand, it demonstrates the strong linkages of AP/TNA with KTK and MH with two of three plants including AP and KTK and one including MH and KTK in its catchment area. Also, the dispatch pattern of plants of India Cements located in TN also confirms the same observation with the catchment area of one plant being limited to TN and for the remaining 3 plants, catchment area comprising KR apart from TN. Furthermore, the catchment area of one of the TN plants viz., Sankarnagar is limited to TN and KR even as per the Acquirer considering Distance Based Catchment. 26. Based on the aforesaid, the Commission observed in the SCN that the assessment needs to be undertaken for two distinct relevant geographic markets: one, corresponding to AP/TNA Narrow Relevant Market (AP/TNA Relevant Market) as delineated by the Acquirer and second in terms of area comprising States of TN and KR (TN/KR Relevant Market). 27. UltraTech, vide the Response to SCN and during the oral hearing, inter alia, submitted that the Commission has given undue weightage to logistics costs and ignored the submissions on grey cement being increasingly transported to longer distances by road, through railway rakes and bulk cement terminals (BCTs). In support of the statement, UltraTech submitted that the percentage of clinker and cement transported by railways has increased by 13.8 percent, i.e., from 121 MTPA in FY 2021 to 138 MTPA in FY 2022, and further increased by 4.3 percent, i.e., from 138 MTPA in FY 2022 to 144 MTPA in FY 2023 and to 153 MTPA in FY 2024 indicating a 6.25 percent increase. Further, as stated, according to the Railways data of April-November 2023, 20.32 lakh tonnes of grey cement was transported to the North-East at a distance of 905 km and Combination Registration No. C-2024/09/1185 Page 11 of 18 88 lakh tonnes to Kerala at a distance of 754 km. Further, it was also submitted that logistics cost of grey cement is not the only primary criterion which determines the feasibility and/ or the non-feasibility as regards transportation. 28. In this regard, it may be noted that logistics may not be the only criteria but 25 percent- 30 percent logistics cost is significant, and as stated above, it is undeniable that the same places a player at a competitive disadvantage as compared to a player whose production centre is closer to the consumption cluster. Further, it is important to note that existing dispatch patterns reflect the most optimal outcome in strategic terms (as it to a large extent takes care of all the factors that UltraTech has sought to highlight) and any change in the same is likely to come at an increased cost or higher price (payoffs) given the distribution of cement clusters in India. Accordingly, giving weightage to the existing supply patterns is in sync with the operational realities. Further, as regards increasing trend of shipping of cement over greater distances, it may be noted that relevance of the same is determined and captured in the proportion of production and consumption of the areas sought to be included in the relevant market and the fact that the relevant markets delineated by the Commission meet even the strong threshold of 10 percent for Modified EH Test and Actual Dispatch Based Catchment Areas imply that the proportion of cement being shipped beyond these areas is still limited. 29. In Response to SCN, as regards the application of catchment area Analysis, it has been stated that UltraTech’s submission was for completeness purposes only, and not for relevant market delineation. It has also been stated that the Commission in its decisional practice has assessed the inter-State dispatch of the industry at large and/ or the dispatch data of both parties (i.e., acquirer and target) before delineating a relevant geographic market and did not delineate a relevant geographic market solely based on an isolated assessment of dispatch from the target assets In this regard, the Commission observed that the two tests, viz., EH Test/Modified EH and catchment area analysis have their own relevance. Further, any proposed combination needs to be assessed in terms of incremental effect on market dynamics. Accordingly, catchment area of Target is relevant as operational/control dynamics are changing for Target, not for Combination Registration No. C-2024/09/1185 Page 12 of 18 Acquirer. Accordingly, the relevant basis for market delineation may be the plants of Target. Be that as it may, the delineation of relevant markets is a complex exercise and accordingly the Commission has always maintained that the same needs to be carried out on a holistic basis to capture the actual market dynamics. 30. Based on, inter alia, the LIFO/LOFI numbers, clinker dependency of TN based grey cement plants from grey cement plants of neighbouring States such as AP, KR being a completely dependent and consumption market with over 90 percent of the grey cement coming into KR from neighbouring Southern States, of which, TN supplies ~70 percent and AP supplies ~20 percent, UltraTech submitted in the Response to SCN that AP has to form part of any relevant market delineation when TN and KR are considered. Accordingly, UltraTech emphasised inclusion of at least AP and possibly KTK and TNA in the relevant market for TN and KR. 31. The Commission observed that the submissions of UltraTech has given primacy to the fact that there are linkages in terms of shipment of cement and not to the extent of such linkages. KR, AP and TN being neighbouring States do share cement dispatches but that in itself may not be sufficient to expand the geographic scope of relevant market. It needs to be borne in mind that inclusion of an additional area opens up the market and impacts the market shares to the dynamics of the added area. Thus, while it is not denied that AP has trade linkages with KR and TN, it is pertinent to note that its linkages with other States such as TNA, KTK and MH are relatively more significant. The catchment area analysis in both the Distance Based Catchment Area terms and Actual Dispatch Based Catchment Area terms indicates that TN/KR market may be distinct even if not from perspective of all plants located in TN but only from a subset of plants. The clinker dependency is an existing condition and the current competition dynamics of TN/KR market would have already factored the same. While all these aspects have a bearing on the delineation of relevant market and can lead to a wider or a narrower definition of market, the Commission has undertaken its assessment considering these aspects and as the Proposed Combination, for the reasons discussed in subsequent part of this order, is not likely to cause AAEC in any of the plausible markets, the exact delineation of relevant market is left open. Combination Registration No. C-2024/09/1185 Page 13 of 18 Competition Assessment – AP/TNA Relevant Market and TN/KR Relevant Market 32. The Commission while forming the prima facie opinion in the SCN had observed that cement market in India and in general context is characterized by inherent features which makes it more susceptible to collusion or cartelization, and it has had a history of cartelization as well. In this regard, the Commission had observed that the relevant features of cement market which make it prone to collusion include (a) product homogeneity; (b) oligopolistic structure in the relevant markets; (c) entry barriers in terms of the requirements of capital, energy, raw materials, sourcing of land for plant in proximity of source of raw materials and setting up logistics supply chain; and (d) expansion barriers given the concerns surrounding availability of adequate limestone, which is a major input to the grey cement industry as per the submissions of UltraTech itself. 33. In the aforesaid backdrop, the Commission considered the impact of the Proposed Combination on the level of concentration. For this purpose, the Commission considered market shares estimates in terms of installed capacity likely to be added by FY 2026-27. UltraTech in its Response to SCN submitted that the counterfactual for merger control can only be for FY 2025 and not a 3-year prospective period until FY 2027, which is based on suppositions and contingencies that may or may never occur. In this regard, the Commission is of the view that merger regulation by its very essence involves consideration of competition dynamics likely to result in future as can be observed from bare perusal of Section 20(4) of the Act which mentions factors such as, actual and potential level of competition, extent of effective competition likely to sustain in a market and extent to which substitutes are available or are likely to be available in the market. Merger regulatory approach has to be dynamic and in tune with the specifics of the sector and there cannot be a rigid rule regarding considering a particular year only to base the competition assessment. Further, this exercise is all the more relevant for sectors such as cement where an entry takes significant time and accordingly futuristic market shares become reflective of not only the market structure but also the entry likely over the reasonable future period. Accordingly, the Combination Registration No. C-2024/09/1185 Page 14 of 18 Commission, based on FY 2026-27 data, undertook the concentration analysis and made the following observations: (a) The total installed capacity of AP/TNA Relevant Market by FY 2026-27 is estimated to be in the range of [240-250] MTPA. The combined share of the Parties is estimated to be in the range of [25-30] percent with an increment of [0-5] percent. While the Proposed Combination will allow UltraTech to consolidate its position as a market leader, the market is characterised by presence of more than 30 cement companies with Adani having a market share in the range of [20-25] percent followed by JSW Cement [5-10] percent and Shree Cement and others holding less than 5 percent share each. The Commission observed that: (i) the incremental market share is in the range of [0-5] percent; (ii) the corresponding incremental HHI is less than 150 with post transaction HHI of less than 1500; and (iii) CR 4, both pre and post transaction are in the range of [55-60] percent. Based on the same, the Commission formed a prima facie opinion that the market is relatively less concentrated and change in concentration as reflected in both measures of concentration viz., CR 4 and HHI (including incremental HHI) is also moderate. (b) The total installed capacity of TN/KR Relevant Market by FY 2026-27 is estimated to be in the range of [50-55] MTPA. The combined share of the Parties is estimated to be in the range of [20-25] percent with an increment of [10-15] percent. The market is characterised by presence of three other significant players viz., Ramco [20-25] percent, Chettinad [20-25] percent and Dalmia [15-20] percent. The TN/KR Relevant Market was estimated to have a pre-CR 4 of more than 75 percent and pre HHI of 1756. Further, the incremental HHI is estimated to be around 300 with post transaction HHI greater than 2000 and the post-merger CR 4 is estimated to be in the range of [85-90] percent. Accordingly, the Commission formed a prima facie opinion that the market is concentrated and is undergoing a significant change in concentration as reflected in both measures of concentration viz., CR 4 and HHI (including incremental HHI). Combination Registration No. C-2024/09/1185 Page 15 of 18 34. Thus, the key concern of the Commission was rooted in the market structure changes in TN/KR Relevant Market making the same more susceptible to collusion or cartelization. 35. UltraTech, in the Response to SCN and during the Oral hearing, made the following submissions as regards the TN/KR Relevant Market: (i) The combined market share of the Parties is around [20-25] percent which is not significant; (ii) As regards entry and expansion barriers, UltraTech pointed out that on 3rd December 2024, 10 limestone mines were supposed to be auctioned in TN by the State government (the same has been postponed till March 2025) and as such, when these limestone mines get auctioned, there would be ample opportunity for new capacity expansion/ entry of new player. As stated, the same would translate into a capacity addition of approximate 20 MTPA with a plant life of approximate 20 - 25 years with 80 percent capacity utilization and that this potential capacity addition of likely 20 MTPA will be approximately 50 percent of the existing grey cement manufacturing capacity in the States of TN and KR; (iii) As regards the market structure, it was submitted that there is a presence of at least 11 players in the TN/KR Relevant Market comprising a good mix of national and regional players; (iv) As regards the market structure it was further submitted that Ramco (#2 post the Proposed Combination), Chettinad (#3 post the Proposed Combination) and Dalmia (#4 post the Proposed Combination) are classic textbook cases of “closest competitors” who exercise significant competitive constraints on the combined entity with market share differential of less than 1 percent, less than 2 percent and less than 6.5 percent, respectively, compared to the combined entity and each of which offer consumers significant choice in a homogenous product market, thereby clearly being evidence of a very contestable and Combination Registration No. C-2024/09/1185 Page 16 of 18 competitively vibrant market, completely contrary to the prima facie concerns raised in the SCN. In this regard, the Acquirer also mentioned recent entry of Adani (via Ambuja + ACC+ Penna+ Orient) in TN/KR Relevant Market; and (v) UltraTech also made submissions on substantially lower capacity utilisation of target assets. It was further submitted that a critical factor of constant and consistent low-capacity utilization is the ever-increasing losses of India Cements. As submitted, India Cements’ quarter-on-quarter loss has increased to INR 339.13 crores in the quarter ending 30 September 2024 from INR 227.34 crores in FY 2024. In this backdrop, it was stated that India Cements is in severe financial distress and lacks funds to upgrade and maintain its plants leading to low-capacity utilization. 36. The Commission notes that the prima facie concerns of the Commission were primarily emanating from concern of increasingly concentrated market structure post the Proposed Combination making the market more prone to collusion. 37. In this regard, the Commission noted the submissions made in respect of auctioning of limestones mines which potentially open up the market capacity by almost 20 MTPA of installed capacity. The Commission viewed this as a significant event with strong potential for keeping the market structure competitive. Further, the Commission also observed that low-capacity utilisation of India Cements seen together with its financial position is indeed indicative of its weak position and accordingly, its lack of relevance as a competitor in the competition dynamics of the plausible TN/KR Relevant Market. This situation of India Cements to some extent is indicative of the Proposed Combination not leading to an exit of a player which was potentially critical for competitive dynamics. Seen in that context, entry of a player such as UltraTech in this market and seen further with the entry of Adani in the same market, the Proposed Combination is not likely to alter the market dynamics in a manner that makes it more susceptible to collusion. It may be mentioned that the above observation may not be considered as indicative of presence or absence of cartelization in the market. Combination Registration No. C-2024/09/1185 Page 17 of 18 V. Competition Assessment - RMC 38. As regards RMC, the Commission noted that India Cements only has nine (9) RMC plants as of FY 2025 (as on 30th June 2024). Considering that RMC is a perishable commodity with a short life span and RMC’s admixtures typically retain workability for about 2.5-3 hours, transportation of RMC is typically limited to 30 kms-40 kms from the batching plant to the job site. Accordingly, the Acquirer proposed delineating relevant geographic market(s) for RMC on a city-limit basis. As submitted, India Cements’ 9 plants are located in three (3) cities, viz., Chennai, Bengaluru and Hyderabad. 39. Based on the market share estimates provided by UltraTech, the Commission observed that the market share of India Cements in each of the aforesaid 3 cities is in the range of [0-5] percent which is insignificant to cause any significant change in competition dynamics. Accordingly, the Commission is of the opinion that the Proposed Combination is not likely to have an AAEC in any of the plausible relevant markets that can be delineated for the RMC overlaps and accordingly, the same does not require any further assessment and the exact delineation of relevant market can be left open. 40. Considering the material on record, including the details provided in the Notice, Response to SCN and the submissions made by the Acquirer during the Oral Hearing 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 appreciable adverse effect on competition in India. Therefore, the Commission approves the Proposed Combination under Section 31(1) of the Act. 41. This order shall stand revoked if, at any time, the information provided by the Acquirer is found to be incorrect. 42. The information provided by the Acquirer shall be treated as confidential in terms of and subject to provisions of Section 57 of the Act. Combination Registration No. C-2024/09/1185 Page 18 of 18 43. The Secretary is directed to communicate to the Acquirer accordingly.