Acquisition of Heidelberg Cement by JSW Group

Acquisition of Heidelberg Cement by JSW Group

1. Background

JSW Steel Limited acquired manufacturing unit of Heidelberg Cement situated at Dolvi, district Raigad. JSW Steel is a listed company incorporated in India and is part of the diversified JSW group with presence in the steel, energy, infrastructure, cement, aluminium and information technology sectors. JSW Steel also owns and operates a cement grinding unit having an installed capacity of 0.3 million ton per annum (mtpa), situated at district Bellary (Karnataka). However, as stated in the notice, the entire quantity of cement manufactured at this grinding unit is stated to be captively consumed.

JSW Cement Limited (“JSW Cement”), which is also part of the JSW group, is engaged in manufacturing and selling different varieties of cement like portland slag cement (“PSC”), ordinary portland cement (“OPC”) and Ground Granulated Blast Furnace Slag (“GGBS”) at two of its plants situated at Bellary (Karnataka) (“Vijayanagar plant”), having an installed capacity of 0.7 mtpa and at Kurnool (Andhra Pradesh) (“Nandyal plant”) having an installed capacity of 4.5 mtpa. Further, as per the notice, JSW Cement has also recently acquired a grinding unit of the capacity of 0.1 mtpa at Dolvi, Raigad (Maharashtra).

HCIL, formerly known as Mysore Cements Limited, is engaged in the manufacture of different varieties of cement, like PSC, OPC and GGBS with a total installed capacity of 6 mtpa. HCIL also produces ancillary products comprising blast furnace slag (“BF slag”) and clinker. It operates its cement plants and grinding units at Tumkur (Karnataka), Jhansi (Uttar Pradesh), Damoh (Madhya Pradesh) and at Dolvi, Raigad (Maharashtra) (Raigad Undertaking). The Raigad Undertaking which is proposed to be acquired is stated to have an installed capacity of 0.6 mtpa. 

2. Market Analysis

2.1 Market Share of Top Companies in cement Sector in India

Source: Data Sourced from Money Control Website, Calculated by author.

Company Name	Net Sales (Rs. cr)	Market Share
UltraTechCement	20,279.80	27%
ACC	11,168.94	15%
Ambuja Cements	9,160.35	12%
Shree Cements	5,887.31	8%
Prism Cement	4,964.86	7%
India Cements	4,440.88	6%
Ramco Cements	3,683.51	5%
Birla Corp	3,016.35	4%
J. K. Cement	2,795.85	4%
JK Lakshmi Cem	2,056.60	3%
OCL India	1,855.52	2%
Orient Cement	1,438.45	2%
Heidelberg Cement	1,208.91	2%
Mangalam Cement	697.31	1%
KCP	622.19	1%

                                         Table Compiled from Money Control Data

Structural analysis of cement industry shows that there is no competitive issue on the basis of market share analysis. Because Heidelberg cement has approximately 2% market share in the overall Indian market.

2.2 Presence of JSW in Cement Market

JSW Cement is a relatively new player in the cement industry.

Sr. No	Plant	Commenced Mfg.	Capacity
1.	Vijaynagar Plant	2009
2.	Nandyal plant	2011-12 (trial run)	Designed to manufacture Clinker- 2.2 million ton per annum (mtpa) and Portland Slag Cement-4.80 mtpa
3.	Dolvi, Raigad (Maharashtra)	2013-14	0.1 mtpa

2.3 Vertical Relationship of JSW Cement and HCIL

JSW Steel is selling BF slag generated as a residue from its steel plant at Dolvi, Raigad (Maharashtra) to the Raigad Undertaking of HCIL. It has been stated in the notice that as part of the proposed combination, the obligation of HCIL to lift BF slag from JSW Steel will end and the proposed combination would help JSW Steel to use the blast furnace slag produced by it effectively and efficiently.

Prima facie it seems that this acquisition is going to increase efficiency of JSW group.

 

Tesco and Trent Combination: Gun Jumping

Tesco and Trent Combination: Gun Jumping 

Tesco said that the intention to acquire was clear as far back as 17 December 2013. Tesco had sought the approval of the DIPP and FIPB for the proposal to acquire fifty percent of the issued and paid up equity share capital of THL and that the said application inter-alia mentioned that the proposed investment by Tesco will include subscription of equity shares of THL and acquisition of existing equity shares of THL from Trent the claim of the Acquirer that no intention or decision to acquire was formed by Tesco at the time of making the application to the DIPP and FIPB is not correct.”

“The Acquirer’s claim that had the notice been filed with the Commission without executing the definitive agreement (s), it would have been incomplete as being without the relevant documents/details, is also misconceived as the Acquirer in its application to the DIPP/FIPB on 17^th December 2013 had provided enough details of the proposed combination which demonstrate that the parties were aware about the type, nature and purpose of the proposed combination at the time of making the said application.” CCI imposed Rs. three Crore fine on Tesco.

In terms of Section 43A of the Act, if any person or enterprise fails to give notice under sub-section (2) of Section 6 of the Act, the Commission shall impose on such person or enterprise a penalty which may extend to one per cent of the total turnover or the assets, whichever is higher, of such a combination. Therefore, under the provisions

Gun Jumping: Thomas Cook India Ltd.

Gun Jumping in Combination Regulation: Thomas Cook India Ltd.

While approving the combination on March 5, 2014, the CCI took note of acquisition of 9.93% shares of Sterling by Thomas Cook Insurance Services Limited (TCISL) through open market purchases between February 10 -12, 2014.

CCI has imposed a penalty of INR 1 Crore on Thomas Cook (India) Limited (“TCIL”),

Thomas Cook Insurance Services Limited (“TCISL”) and Sterling Holidays Resorts

(India) Limited (“Sterling”) under Section 43A of the Act, for failing to notify and consummating certain non-reportable but inter-connected transactions before taking the

approval of the CCI for the reportable part of the inter-connected transactions.

Parties filed a combination notice with the CCI on February 14, 2014.

The CCI held that, since the Transaction and the market purchases were authorized in the same Board meeting and all transactions were related to the business and shares of Sterling, the market purchases were inherently related to the other transactions and, therefore, cannot be viewed in isolation for the purpose of any exemption.

The CCI held that the substance of the transaction is relevant to assess the effect on competition irrespective of the number of steps involved in the transaction.

Therefore, the Parties were required to notify all the steps and not consummate any part of the composite combination prior to the approval of the CCI.