On February 14, 2023, the CCI approved the acquisition of control over LT Foods Ltd. (‘LT Foods’) by SALIC International Investment Company (‘SIIC’) and acquisition of certain equity share capital of Daawat Foods Ltd. (‘DFL’) by LT Foods (‘Proposed Combination 6’). ^[1] The CCI noted that Proposed Combination 6 consisted of the following steps:

i.     Step 1: Subscription by SIIC of 7.89% of the total issued, subscribed and paid-up share capital of LT Foods by way of a preferential allotment;

ii.    Step 2: Acquisition by LT Foods of 29.52% of the issued and paid-up voting share capital of DFL from United Farmers Investment Company (‘UFIC’), a wholly owned subsidiary of SALIC;

iii.   Step 3: Acquisition of equity shares of LT Foods by SIIC from certain promoter shareholders, amounting to 1.33% of the total issued, subscribed and paid-up share capital of LT Foods;^[2] and

iv.    Step 4: Subsequent to the completion of Steps 1 to 3 above, SIIC (likely through its wholly owned subsidiary) will acquire an additional 10% shareholding of LT Foods through secondary, on-market purchases.

Pursuant to these steps: (i) SIIC will hold up to 20% of the equity share capital of LT Foods; and (ii) LT Foods will hold 100% of the equity share capital of DFL.

Transaction Documents

i.     Share subscription agreement, share purchase agreement and shareholders’ agreement of LT Foods each dated November 10, 2022, entered into, inter alia, between SIIC and LT Foods.

ii.    Share purchase agreement and second amendment agreement to the shareholders agreement of DFL.

• Supply agreement dated November 10, 2022 entered into between SALIC, SIIC and LT Foods (‘Supply Agreement’).

Parties to Proposed Combination 6

SIIC is an unlisted limited liability company based in Riyadh, Kingdom of Saudi Arabia, which is fully owned and controlled by SALIC.

SALIC is established by Royal Decree as a Saudi company owned by the Public Investment Fund (‘PIF’). It is an investment company with holdings in various international companies, specialised in the fields of agriculture and trading of food commodities. Its agri-business is focused on farming and procurement, as well as importing commodities into the Kingdom of Saudi Arabia. SALIC is PIF’s only investment in the agri-commodity sector. Neither SALIC nor SIIC is directly present in India. SALIC, indirectly through SIIC, is present in India through its investment in Olam Agri Holdings Pte. Ltd. (‘Olam Agri’) and DFL (through UFIC).

The group of LT Foods includes LT Foods itself and its downstream affiliates. The business of LT Foods (including DFL) comprises of basmati, non-basmati and other specialty rice, and rice food products etc. The company portfolio relating to rice and rice food products includes a range of brands including flagship brands namely, ‘Daawat’ and ‘Royal’ and regional brands such ‘Heritage’, ‘Rozana’, ‘Devaaya’ etc. The group of LT Foods is also present in the organic food and ingredients segment, easy to cook rice-based / rice allied food etc.

Relevant Market and Overlaps

The CCI noted the overlap between SALIC (only Olam Agri as SALIC’s shareholding in DFL is being acquired by LT foods as stated above) and LT Foods in the following markets in India:

i.    Distribution and sale of basmati rice (‘First Market’);

ii.    Distribution and sale of non-basmati rice (‘Second Market’);

iii.   Production and sale of Oil seeds (‘Third Market’); and

iv.    Wholesale trading of Edible oils (‘Fourth Market’).

The CCI, however, left the exact delineation of relevant markets open.

Competitive Assessment

The CCI observed that:

With respect to the First Market:

i.    While LT Foods, along with its affiliates, has a market share in the range of 10% – 15% in the market for basmati rice in India and 25% – 30% in the market for branded basmati rice in India, the presence of Olam Agri is miniscule as reflected in the market share of less than 1% in both the basmati rice segment and branded basmati rice sub-segment in India;

ii.    The segment/sub-segment is led by KRBL Limited (whose portfolio include brand ‘India Gate’) and comprises of other significant competitors such as Adani Wilmar Limited (whose portfolio includes brands such as ‘Fortune’ and ‘Kohinoor’);

iii.   The quantity that LT Foods may be required to supply pursuant to the Supply Agreement^[3] is not very significant when seen in the context of size of India basmati rice market or basmati rice export market;^[4] and

iv.    As per clarifications given by the parties, LT Foods’ supply in the Indian market will not be hampered as a consequence of the Supply Agreement.

With respect to Second Market:

The CCI noted that this market appears to be fragmented and further LT Foods and Olam Agri have a miniscule presence.

With respect to Third and Fourth Markets

The CCI noted that: (i) LT Food and Olam Agri produce different types of products in these markets; and (ii) LT Foods’ presence in these markets is miniscule, as can be seen from its turnover derived from these markets.

Accordingly, the CCI approved Proposed Combination 6, holding that it was unlikely to have any AAEC in India.

[1] Combination Registration No. C-2023/01/996.

[2] Such that SIIC would hold 9.22% of the issued and paid-up share capital of LT Foods (on a fully diluted basis), after the completion of Step 3.

[3] As per the Supply Agreement, SIIC would be allowed to purchase basmati rice from LT Foods and supply it for consumption to countries such as Kingdom of Saudi Arabia and the countries in the middle east and North Africa region.

[4] The CCI in this regard observed that, considering the statistics for FY 2021-22 as submitted, the basmati rice exports amount to around 3.95 million tonnes out of aggregate estimated production of 6.40 million tonnes thus implying that around 62 percent of rice produced in India is exported.