On February 9, 2023, the CCI approved the purchase of compulsorily convertible preference shares (‘CCPS’) of Hero Future Energies Global Ltd. (‘Target’) and their subsequent conversion to equity shareholding by Ardor Holdings II Pte. Ltd. (‘Acquirer’) (collectively, ‘Parties’) (‘Proposed Combination 1’)^[1]. Post the conversion, the Acquirer would have 40% – 80% equity shareholding of the Target (depending on valuation of Target at the time of conversion).

Trigger Documents

The parties notified the CCI, pursuant to the following:

i.     Shareholders agreement dated August 16, 2022 (‘SHA’) between the Target, Hero Future Energies Asia Pvt. Ltd. (‘HFE India’), Hero Future Energies Asia Pte. Ltd and BM Munjal Energies Pvt. Ltd. (‘Sponsor’).

ii.    Subscription agreement dated August 16, 2022, between Target, Sponsor and Acquirer (‘SSA’).

Parties to Proposed Combination 1

The Acquirer is a private limited company incorporated in Singapore. It is a special purpose vehicle, indirectly wholly owned by investment funds, vehicles, and/ or accounts advised and managed by various subsidiaries of KKR & Co. Inc.^[2] (‘KKR’). The Acquirer does not have any physical presence in India.

The Target is a private company incorporated in England and Wales and is part of the renewable energy arm of the Hero Group. The Hero Group is a diversified conglomerate run by the Munjal family. The Target’s principal business activity is setting up/acquisition of plants / projects engaged in solar power generation and wind power generation. Further, the Target does not have any direct physical presence in India.

Relevant Market and Overlaps

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

i.     Broad market as the market for power generation;

ii.    Narrow market as the market for power generation through renewable energy sources; and

iii.   Narrower market as the market for solar power generation.

The CCI observed there is no direct overlap but three KKR portfolio companies (‘Portfolio Companies’) are active in the same sector in India as the Target (power generation through solar source). One of these companies being, Indigrid Trust Limited (‘Ingdigrid’), is active in power transmission (vertically related to power generation).

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

i.     The market for power generation in India (‘Upstream Market’); and

ii.    The market for power transmission in India (‘Downstream Market’).

The CCI left the exact delineation of relevant markets open, as Proposed Combination 1 is unlikely to have an appreciable adverse effect on competition (‘AAEC’) in India.

Competitive Assessment

The CCI observed that:

i.     The combined market share of Portfolio Companies and Target is insignificant in all the aforementioned horizontal markets; and

ii.    Further these markets are characterised by the presence of other players which will continue to pose competitive constraints, post-combination. The CCI observed the same qua the potential vertical overlap, between Indigrid and the Target in the market for power transmission in India.

Accordingly, the CCI approved Proposed Combination 1, holding that it was unlikely to have any AAEC in India.

[1] Combination Registration No.C-2022/09/971.

[2] KKR is a global investment firm that offers alternative asset management and capital markets and insurance solutions.