On February 15, 2023, CCI approved acquisition of certain assets and shares by Dalmia Cement (Bharat) Limited (‘Dalmia’) of Jaiprakash Associates Ltd. (‘JAL’) and associated JAL entities as detailed below (‘Target(s)’)^[1] under a framework agreement dated 12 December 2023, executed between Dalmia, JAL and promoters of JAL represented by Shri Jaiprakash Gaur, Executive Chairman, Jaypee Infra Ventures Pvt. Ltd. (‘JVPL’)^[2] (‘Proposed Combination 3’).

Proposed Combination 3

The Proposed Combination 3 is a combination of the following transactions:

i.    Transaction 1(a): Acquisition by Dalmia of 74% shareholding of Bhilai Jaypee Cement Limited (‘BJCL’) from JAL.

ii.   Transaction 1(b): Acquisition by Dalmia of a cement grinding unit owned by JPVL located in Madhya Pradesh, along with all ancillary connected assets on a slump sale basis.

iii.  Transaction 2: Acquisition of 57% shareholding by Dalmia in East India Energy Private Limited (this is a SPV incorporated by JAL). It houses a 180 megawatt power plant in Uttar Pradesh. This is followed by acquisition by Dalmia of certain business undertakings of JAL including cement plants located in Madhya Pradesh, Uttar Pradesh, cement blending plant in Uttar Pradesh, on a slump sale basis.

iv.  Transaction 3: Acquisition by Dalmia of JP Super Plant in Uttar Pradesh on a slump sale basis.

Parties to Proposed Combination 3

Dalmia is engaged in the manufacturing of grey cement and has various cement plants. The plants include integrated plants, grinding units, clinker units etc. These plants are located in 10 states across India. Dalmia belongs to the Dalmia Bharat Group (‘Dalmia Group’). Dalmia Group engages in manufacture and sale of cement, manufacture and sale of sugar, manufacture and sale of refractory service business etc. However, going forward in the financial year 2023, Dalmia Group will stop providing refractory services to cement manufacturers in India. Dalmia Group is also engaged in power generation in India.

The Target(s) are majorly involved in cement manufacturing and sale, manufacturing and sale of clinker, power generation assets, coal based thermal power generation for captive consumption purposes etc.

Relevant Market and Overlaps

With respect to horizontal overlaps, the CCI identified the following markets in India:

i.    Manufacture and sale of grey cement in India: Given the Target’s cement manufacturing unit in Chhattisgarh – it was considered the base state. Based on the Elzinga-Hogarty test (‘EH Test’)^[3] carried out at the LIFO-LOFI thresholds of 10%, the relevant geographic market for manufacture and sale of grey cement was defined at the broad level as the region comprising the states of Chattisgarh, Odisha, West Bengal, Bihar, and Jharkhand which are situated in the Eastern part of India and therefore the relevant market for this would be the ‘Eastern Relevant Market’, and at the narrow level (based on results of the EH Test at 25% LIFO-LOFI threshold) as the regions of Chattisgarh, Odisha, and Bihar which would be the ‘Narrow Eastern Market’. CCI also recognised the Target has cement manufacturing units in the states of Madhya Pradesh and Uttar Pradesh to which the Acquirer Group made nominal dispatches in FY 2022 and defined the relevant market as (‘MP/UP Relevant Market’).

ii.   The market for manufacture and sale of clinker in India.

iii.  Given Dalmia Group engagement in power generation through renewable and non-renewable sources, and Target’s presence in these markets for captive consumption, the CCI identified the market for power generation in India at the broad level and the market for thermal power generation in India at the specific level.

With respect to vertical overlaps, the CCI noted that there were no existing vertical relationships between Dalmia and the Target(s). However, CCI identified the following markets in terms of potential vertical relationships:

i.    Dalmia Group provides refractory services which could be availed by Target(s). However, since Dalmia Group will cease to provide refractory services to cement manufacturers in India, no potential vertical relationship could be formed between Dalmia Group and the Target(s).

ii.   The market for manufacture and sale of clinker in India, given that the Target can provide clinker in India to the Acquirer group and the ‘market for procurements of clinker in India’ by Dalmia Group.

Competitive Assessment

The CCI observed that the combined market share in FY 2021-22 of Dalmia Group and the Targets in the market for manufacture and sale of grey cement in the Eastern Relevant Market and the Narrow Eastern Relevant Market was in the range of 10-15% and 15-20% respectively. However, the incremental share in both these markets were in the range of 0-5% both in terms of volume and the installed capacity. The CCI also noted that there were other players in this market like UltraTech, Birla Corporation, Adani Group etc.

The combined market share of Dalmia Group and the Target(s) was miniscule, in the 5-10% range in the MP/UP Relevant Market.

Further, in FY 2022, it was noted that both the Dalmia Group (through Dalmia and CCIL), and the Target(s) engaged in the manufacture and sale of clinker primarily for the purpose of captive consumption. A very small amount was sold to third-parties by Dalmia Group. The market share in terms of installed capacity of Dalmia Group was in the range of 5-10% and the Target(s) was 0-5%.

Regarding the market for power generation in India, CCI noted that both Dalmia Group, and the Target(s) had miniscule market share. On top of that, these markets consisted of various players, both private and public like Tata Power, Adani Power, National Thermal Power Corporation etc.

Lastly, with regard to the potential vertical relationship between Dalmia Group and the Target(s) in the market for provision and procurement of clinker in India, the Target(s) have a miniscule market share between 0-5% in the market for the manufacture and sale of clinker in India in terms of installed capacity. Also, in the market for procurement of clinker in India, there are various integrated players like Dalmia Group, such as UltraTech, Shree Cement etc.

For the reasons explained above, the Commission approved Proposed Combination 3 holding that it was not likely to have any AAEC in India.

^[1]  Bhilai Jaypee Cement Limited, Cement Grinding Unit located at Nigrie (Madhya Pradesh), East India Energy Private Limited, certain business undertakings of JAL located at Rewa (Madhya Pradesh), Chunar (Uttar Pradesh), Churk (Uttar Pradesh), Sadwa Khurd (Uttar Pradesh), JP Super Plant located at Sonebhadra (Uttar Pradesh)

^[2]  Combination Registration No. C-2022/12/993

^[3]  The Elzinga-Hogarty test was a test designed to analyse commodity movements using shipment data to determine the relevant geographic market. Little in from outside (‘LIFO’) measures the imports. Little out from inside (‘LOFI’) measures the exports. If the area under consideration has significant trade (inflow and outflow) of a particular product or service with another area, then the relevant geographic market would be expanded to include the other area if it is above a certain threshold. It is likely that the CCI applied this test in this case to identify relevant geographic markets in this case given that manufacture and sale of grey cement was taking place within multiple states.