On April 30, 2020, CCI approved the acquisition of approximately 3% of the shareholding in Intas Pharmaceutical Limited (‘Intas’) by Canary Investment Limited (‘Canary’) and Link Investment Trust II (‘Link’) (affiliates of ChrysCapital).^[1] Through the transaction, the shareholding of ChrysCapital (through its affiliates) would have increased from 3% to approximately 6% in Intas. The transaction also granted ChrysCapital and its affiliates the right to receive information regarding the affairs of Intas, right to appoint a director on the board, and the right to veto certain corporate actions including amendment to charter documents, commencement of new businesses and change in capital structure. ^[2]

ChrysCapital, Canary, and Link (together, ‘Acquirers’) argued that the acquisition of less than 10% with minority investment protection rights was exempt because it does not qualify as a strategic acquisition. CCI disagreed.  It noted that an acquisition that involves rights that allow active participation or the ability to materially influence the day-to-day affairs or the strategic corporate actions of a target enterprise cannot be regarded as being ‘solely as an investment’.

ChrysCapital had minority shareholdings in other companies in the pharmaceutical sector apart from its shareholding in Intas. It held less than (i) 10% shareholding in Mankind Pharma Limited (‘Mankind’) and Eris Lifescience Limited; (ii) 20% shareholding in GVK Biosciences Private Limited (‘GVK’) and Curatio Healthcare Private Limited (‘Curatio’).

In its assessment, CCI was concerned with the Acquirers’ common shareholding in its controlled portfolio entities (i.e., GVK, Curatio, and Mankind) and Intas in the same business. CCI considered that such shareholding in competing businesses is likely to allow the Acquirers the ability to pursue anticompetitive goals such as allocation of product or geographic market or customers, streamlining innovation efforts, price arrangements, or bid-rigging in concentrated markets. It also noted that the combined market share of Intas and the Acquirers’ controlled portfolio entities was greater than 30% in more than 20 pharmaceutical products.

To address CCI’s concerns, the Acquirers offered certain voluntary modifications.  They undertook to (i) remove their director on the board of Mankind; (ii) restrict the use of information concerning Intas, Curatio, and Mankind; and (iii) not exercise their veto rights in Mankind regarding change in capital structure, mergers and acquisitions, amendment to charter documents, and commencement of new businesses, except some limited exemptions to protect the value of their investment. CCI accepted these commitments and approved the transaction.

[1] Combination Registration No. C-2020/04/741.

[2] This summary is based on a copy of the decision published by CCI on July 10, 2020.  The decision got subsequently removed from CCI’s website.