Background

On October 3, 2023, CCI approved acquisition of 100% shareholding in Lanco Amarkantak Power Limited (‘Target’) by PFC Projects Limited (‘PPL’), REC Limited (‘REC’), SJVN Limited (‘SJVN’) and Damodar Valley Corporation (‘DVC’) (collectively referred to as the ‘Acquirers’)^[1]

The Proposed Combination envisages the acquisition of 25%, 24%, 41% and 10% shareholding by PPL, REC, SJVN and DVC, respectively of the Target. However, since the Target is undergoing a  ‘CIRP, the Acquirers may adjust their shareholding, inter se, only in case of certain exceptional contingencies and consequently the shareholding of PPL, REC, SJVN and DVC may be in the ranges of 25 to 52%, 24 to 50%, up to 46% and up to 10% respectively (‘Proposed Combination’).

Parties to Combination

PPL is a wholly owned subsidiary of Power Finance Corporation Limited (‘PFC’), a GOI undertaking. PPL carries out the business of generation, accumulation, distribution, and supply of electricity generated through various means (including, thermal, hydel, solar, wind, etc.).

REC/Acquirer(s): REC is a subsidiary of PFC. It is presently an NBFC categorized as an Infrastructure Finance Company by the RBI. REC engages in financing projects and schemes for the entire power sector value chain including generation, transmission, distribution, rural electrification, and activities having forward or backward linkage with power projects.

SJVN/Acquirer(s): SJVN is a listed company which is held by the GOI and public shareholders. SJVN commissions power generation and transmission projects.

DVC/Acquirer(s): DVC is a statutory corporation set up under the Damodar Valley Corporation Act, 1948. It is under the administrative control of the Ministry of Power, GOI, engaged in the businesses of power generation, power transmission, water management, mining, and provision of related consultancy services.

Target: Target is an unlisted public limited company engaged in thermal power generation in India. Prior to the CIRP, the Target was a 52% subsidiary of Lanco Thermal Power Limited, which in turn, is held by the ultimate parent entity, Lanco Infratech Limited.

Relevant Markets and Overlaps

The PFC group is engaged in power generation, provision of credit services and consultancy services to power sector entities, financial services for rural electrification schemes, power trading solutions, etc. SJVN Group is engaged in activities of power generation, transmission, power trading and provision of consultancy services in relation to hydel power generation and DVC Group is engaged in activities of power generation, transmission, consultancy services etc. The CCI noted that the activities of the Parties exhibit horizontal overlaps in the business of power generation in India at a broader level and in the sub-segment of power generation in India from non-renewable sources.

Moreover, the CCI noted that the activities of the parties lead to the creation of the following vertical linkages:

i.    The market for upstream activity of power generation (Target) and downstream activity of power transmission (SJVN and DVC group);

ii.   Market for upstream activity of power generation (Target) and downstream activity of power trading (PFC group, SJVN group);

iii.  Market for upstream activity of provision of consultancy services to power sector entities (Acquirers) and downstream activity of power generation (Target); and

iv.   Market for upstream activity of provision of credit services to power sector entities (PFC group) and downstream activity of power generation (Target).

Competitive Assessment

The CCI approved the Proposed Transaction concluding that it was not likely to have an AAEC in India for the following reasons:

i.    The total power generating capacity of the Target (including planned capacity) is 1920 MW which amounts to less than 1% of the all-India installed capacity of power stations; and

ii.   Considering that the Target is undergoing CIRP, it has not been active in the bidding of power purchase agreements in the last three years.

[1] PFC Projects Limited / Lanco Amarkantak Power Limited (C-2023/08/1051).