On December 29, 2021, CCI approved the joint acquisition of Jhabua Power Limited (‘Jhabua’) by NTPC Ltd. (‘NTPC’) and secured financial creditors (‘SFCs’) comprising of Axis Bank Limited (‘ABL’), Bank of India (‘BOI’), Life Insurance Corporation of India (‘LIC’), Punjab National Bank (‘PNB’), State Bank of India (‘SBI’), UCO Bank, Union Bank of India (‘UBI’), Power Finance Corporation Limited (‘PFC’) and REC Limited (‘REC’). The proposed combination was notified to CCI pursuant to corporate insolvency resolution proceedings (‘CIRP’) initiated against Jhabua under the Insolvency and Bankruptcy Code, 2016.^[1]

The revised resolution plan proposed extinguishing equity shares held by the existing shareholders of Jhabua and issue of fresh equity shares and non-convertible debentures (‘NCDs’) to NTPC and the trust, settled by Jhabua for the benefit of the SFCs (‘Trust’). Accordingly, the proposed combination would involve issuance of 50% of equity shares and NCDs to NTPC and 50% of equity shares and NCDs to the Trust.

NTPC is a listed public sector undertaking categorised as a ‘Maharatna’ company. It is an energy conglomerate having presence in the entire value chain of the power generation business and its principal business activity is electric power generation through coal-based thermal power plants. The SFCs are the committee of creditors consisting of: (i) banks (ABL, BOI, PNB, UCO and UBI), which are engaged in provision of various banking and financial services; (ii)  LIC, which is engaged in the provision of various schemes to retail and corporate consumers; and (iii) infrastructural finance companies (such as PFC and REC), which are engaged in provision of credit facilities to entities in the power sector (and its allied sectors) as well as certain consultancy and advisory services.

Jhabua is a private limited company based in the Seoni district of Madhya Pradesh, engaged in the business of power generation. Its principal business activity is generation of power through coal-based thermal power stations.

Considering the activities of the NTPC, SFCs (directly or through their investee entities) and Jhabua, CCI noted that the parties exhibited horizontal overlaps in the business of power generation at the broader level and potential vertical relationships considering the business of power generation of Jhabua and considering the presence of: (i) SFCs in the business of deployment of credit for the industry; (ii) certain investee entities of some SFCs in business of manufacturing transformers, conductors and cables; and (iii) PFC and REC in the provision of consultancy services in the power sector. CCI relied on its order in Adani Green Energy Limited/S.B. Energy Holding Limited,^[2] where it was observed that in the power generation sector, since both the existing and pipeline capacities underlying the market share estimates are committed for the long term (around 25 years) under the power purchase agreements (‘PPAs‘) and considering the general functioning of the power generation sector relating to the execution of PPAs on the basis of bidding, market shares have limited relevance. Accordingly, CCI had considered the information in relation to capacities participated, won by the parties in total capacity auctioned to assess the impact of the transaction on competition dynamics.

In its assessment of the proposed combination, CCI noted that Jhabua’s overall presence (in terms of its existing market share or the bidding activity for power generation projects during the CIRP) was insignificant and hence, the increment in existing market share or the incremental ability to win power generation projects resulting from the proposed combination was also insignificant to cause any change in competition dynamics in any plausible relevant market horizontally or in vertically in the production chain of power generation. Accordingly, CCI concluded that the proposed combination was unlikely to cause an AAEC in India and approved the proposed combination under Section 31(1) of the Act.

[1] Combination Registration No. C-2021/12/884.

^[2] Combination Registration No. C-2021/05/837.