On April 30, 2020, CCI approved the additional acquisition of 3% of the shareholding of Intas Pharmaceuticals Ltd. (‘Intas’) by ChrysCapital and its affiliates (‘ChrysCapital’), Canary Investments Ltd. (‘Canary’) and Link Investment Trust II (‘Link’). ^[1]

ChrysCapital is engaged in the business of making investments in different sectors including consumer goods and services, financial services, healthcare and pharmaceuticals. Canary is an investment company owned by ChrysCapital VII LLC, which has been set up by ChrysCapital. Link is a private trust registered in India, which is also in the business of making investments.

Intas is in the business of development, manufacturing and marketing of pharmaceutical formulations. It is the ultimate parent company of various Intas subsidiaries.

CCI observed that ChrysCapital would obtain the right to receive information regarding the affairs of Intas, right to appoint a director on the board of Intas and right to veto certain corporate actions including amendment to charter documents, commencement of new line of business and change in capital structure. CCI further observed that there is a horizontal overlap between the activities of Intas and other pharmaceutical companies in which ChrysCapital has shareholding and contractual rights to participate in some of their strategic corporate actions.

ChrysCapital owns less than or equal to 10% of the share capital in each of Mankind Pharma Limited (‘Mankind’) and Eris Lifesciences Limited (‘Eris’) and less than 20% of the share capital in each of GVK Biosciences Private Limited (‘GVK’) and Curatio Healthcare Private Limited (‘Curatio’).

ChrysCapital’s interest in Eris is limited to its shareholding. Therefore, CCI did not consider it important for identification of overlaps. However, ChrysCapital’s interest in GVK, Curatio and Mankind (‘Portfolio Entities’) included board representation, right to seek information as well as the right to veto certain corporate actions including the change in capital structure, mergers and acquisitions, commencing new line of business and amendment to charter documents. Based on this, CCI observed that ChrysCapital enjoys the ability to influence the strategic focus and operations of GVK, Mankind and Curatio.

Based on ChrysCapital’s power to veto certain strategic corporate actions, CCI observed that ChrysCapital had the ability to materially influence the strategic affairs of these entities and a similar position would be gained in Intas through its investment in Intas.

In its assessment of the relevant market, CCI referred to its earlier decisions and held that with regard to prescription drugs CCI has looked at the molecular details (‘ATC 4 Level Classification’). With regard to OTC products, the classification had been made on the basis of formulation level and therapeutic indication (‘ATC 3 Level Classification’).

CCI noted that the combined market share of Intas and the Portfolio Entities was greater than 30% in more than 20 pharmaceutical products treating ailments in (a) alimentary tract and metabolism; (b) cardiovascular system; (c) dermatologicals; (d) genito-urinary system and sex hormones; (e) musculo-skeletal system; (f) nervous system; (g) respiratory system; and (h) various others. The horizontal overlap of the activities of Intas and Curatio were limited to one product i.e., Biotin and they only had a market share of 7% and 4% respectively. Mankind and Intas were found to be significant competitors at the ATC 4 Level Classification, with their market shares remaining similar for more than three years. CCI observed that the common shareholding in Mankind and Intas would enable ChrysCapital to engage in various kinds of anti-competitive coordination and actions.

In order to address possible anti-competitive concerns, ChrysCapital offered the following voluntary modifications:

i.      remove their director from the Mankind’s board;

ii.    restrict use of information relating to Intas, Curatio and Mankind; and

iii.   an undertaking not to exercise veto rights in Mankind in relation to change in capital structure, merger and acquisition, amendment to memorandum and articles of association and commencement of new business, with certain limited exemption to protect the extent of their shareholding/ investment.

In light of these voluntary modifications, CCI held that these modifications will address any potential competition concerns and therefore, approved the combination.

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