On July 10, 2020, the CCI approved two acquisitions by Kubota Corporation (‘Kubota’) of: (i) 9.09% of the equity shares of Escorts Limited (‘Escorts’); and (ii) 40% of the total share capital from Sumitomo Corporation (‘Sumitomo’) in Kubota Agricultural Machinery India Private Limited (‘KAI’), a 60:40 joint venture (‘JV’) between Kubota and Sumitomo respectively. Subsequently, Escorts will acquire 40% shareholding in KAI from Kubota. Accordingly, KAI will become a 60:40 JV between Kubota and Escorts.^[1]

Kubota is globally present in sectors including tractors, combine harvesters and rice transplanters, utility vehicles, turf equipment, construction machinery, engines, weighing & measuring control systems, ductile iron pipes, valves, pumps, membrane solutions and waste water treatment plants. Kubota is active in India through two JVs, ‘KAI’ and Escorts Kubota India Private Limited (‘EKI’). KAI is engaged in the business of supplying tractors, rice transplanters, combine harvesters and power tillers, as well as implements and attachments in India. EKI is engaged in the manufacturing of tractors for both Indian and export markets and is yet to start production.

Escorts is in the business of manufacturing and sale of agri-machinery, construction equipment and railway equipment in India. It also trades in oils & lubricants, implements, trailers, tractors, construction, earth moving and material handling equipment. Further, Escorts through its subsidiaries and JVs is also engaged in the business of crop solutions, security trading and financial activities in India.

The CCI in its assessment observed that there are horizontal overlaps between Kubota and Escorts in the segments of manufacture and sale of: (i) tractors; (ii) combine harvesters; and (iii) diesel engines. The CCI further observed that after the transaction, the combined market share of Kubota and Escorts will be in the range of 10-15% in the segment of tractors and combine harvesters and 0-5% in the segment of diesel engines.

With respect to potential vertical relationships, the CCI observed that the activities of KAI in trading and assembly of agricultural equipment could be considered as an upstream relationship to the activities of Escorts Crop Solution Limited (a wholly owned subsidiary of Escorts), in provision of agri-services - harvesting, transplanting, rotavating, spraying, etc. However, Escorts Crop Solution Limited's low market shares indicated that the transaction will not foreclose competition in the vertically related markets.

With respect to potential complementary relationships, the CCI observed that: (i) implements (which are usually connected to tractors and perform variety of activities such as ploughing, threshing etc.) could be considered as complementary to sale of tractors; and (ii) spare parts and lubricants may be considered as complementary to agriculture equipment. However, the combined market shares of Kubota and Escorts were in the range of 0-5% and therefore, insignificant. Accordingly, the CCI held that the transaction is not likely to have an AAEC in India, and granted it's approval.

^[1] Combination Registration No. C-2020/06/750