On September 10, 2024, the CCI approved a combination which envisaged Dixon Technologies (India) Limited (‘DTIL’) acquiring a 6.50% equity stake in Aditya Infotech Limited (‘AIL’) and AIL obtaining 50% shareholding in their joint venture, AIL Dixon Technologies Private Limited (‘ADTPL’), from DTIL. ^[1]

Description of Transaction and Parties

On July 26, 2024, DTIL and AIL jointly filed a Notice before the CCI pursuant to the execution of the share subscription and purchase agreement (‘SSPA’) amongst DTIL, AIL and ADTPL and Shareholders’ Agreement amongst DTIL, AIL and other shareholders of AIL (‘SHA’), both dated July 8, 2024 (DTIL and AIL are collectively referred to as the ‘Notifying Parties’; and Notifying Parties and ADTPL are collectively referred to as the ‘Parties’).

The combination envisages the following steps:

Step 1: Subscription of 6.50% equity share capital of AIL, on a fully diluted basis, by DTIL; and

Step 2: Acquisition of 50% shareholding of ADTPL, currently held by DTIL, on a fully diluted basis by AIL, as a consideration for Step 1 (‘Proposed Combination’).

DTIL: It is a listed company involved in the business of providing Electronics Manufacturing Services (‘EMS’) for communication devices, lighting solutions, television, washing machines, wearables and hearables, printed circuit boards for air conditioners, telecom & networking products, set-top boxes, Electronic Security Systems (‘ESS’), etc. ESS encompasses a variety of technologies and devices designed for protection. DTIL provides EMS for ESS only through its joint venture with AIL, namely ADTPL. DTIL along with its affiliates constitute the ‘DTIL Group’ with DTIL being its ultimate parent entity. It operates under the ‘Dixon’ brand in India. One of the affiliates of DTIL, namely Dixon Electro Appliances Private Limited (‘DEAPL’) is engaged in the provision of EMS for routers. At present, DEAPL manufactures routers exclusively for Bharti Airtel Limited.

AIL: It is an unlisted public company engaged in the business of sourcing, distributing and marketing ESS under its brand name ‘CP Plus’ and ‘Onvigil’. It also acts as an exclusive dealer for Dahua Technology India Private Limited (‘Dahua India’), which sells ESS in India under its brand name ‘Dahua’. AIL is controlled by members of the Khemka family. Entities belonging to the Khemka family are referred to as the ‘AIL Group’, with AIL being its ultimate parent entity. AIL is engaged in distribution and sale of routers, which it procures from third-party vendors.

ADTPL: It is a 50:50 joint venture between DTIL and AIL. It is engaged in EMS for AIL under ‘CP Plus’ brand. While the ADTPL also provides EMS for ESS to other players as well to a limited extent and on an ad hoc basis.

Overlaps Identified by Parties

The Parties submitted the following:

Horizontal Overlaps: There is no horizontal overlap between the business activities of the Parties.

Vertical Overlaps:

i.     Existing Vertical Overlap: In the provision of EMS for ESS by ADTPL (upstream) and distribution and sale of ESS by AIL (downstream).

ii.    Potential Vertical Overlap: In the provision of EMS for network devices by DEAPL (upstream) and distribution and sale of routers by AIL (downstream).

Assessment by CCI

The CCI noted that: (i) the market share of DEAPL in the provision of EMS for network devices is in the range of 5-10% and that of AIL is in the range of 0-5%; (ii) the market share of ADTPL in the provision of EMS for ESS is in the range of 0-5%; and (iii) there are also other big players engaged in the sale of ESS in India such as Hikvision, Dahua, Axis Communications and Bosch.

Thus, the CCI concluded that the Proposed Combination is not likely to have appreciable adverse effect on competition in India. Therefore, in absence of any competition concern, the CCI approved the Proposed Combination.

[1] Dixon Technologies (India) Limited/Aditya Infotech Limited (Combination Registration No. C2024/07/1169).