The Competition Commission of India (CCI) has approved Aditya Birla Group firm Ultratech's nearly Rs 3,800-crore deal with Jaypee Cement Corporation to acquire its facilities in Gujarat. Fair trade regulator CCI ruled the transaction does not raise unfair competition concerns.
As per the deal, Ultratech, a leading manufacturer of cement in India, will acquire Jaypee's cement unit in Gujarat comprising an integrated cement plant at Sewagram, limestone reserves, captive power plant and mining leases, among others.
In an order released on Monday, the fair trade regulator said "it is of the opinion that the proposed combination is not likely to have an appreciable adverse effect on competition in India".
CCI in its order observed that ABG Cement and Lafarge India were likely to set up cement plants in the states of Gujarat and Rajasthan, respectively.
According to CCI, "entry of new firms is generally considered to counterbalance any attempt by the merging parties or their competitors to profit from the potential reduction in competition brought about by the merger".
"The new entrant, if of sufficient size, effectively disciplines the existing market participants, as size of the new entrant does matter in the markets characterised by few players," it said.
Among others, CCI also observed from Ultratech's submissions that it intends to introduce and "utilise its processes and core competence to increase the capacity utilisation of Jaypee's assets thereby increasing overall economic efficiency in production and increase the overall quantity of cement in the market for grey cement".
"It has also been stated that the location of the target (Jaypee) assets will reduce lead time to customers," it added.
The deal, which was executed in September this year, has been pegged as one of the largest M&A deals in recent time and will further cement UltraTech's No. 1 position in the market and give it an entry into Gujarat.
For the Jaypee Group, it will help pare a portion of its Rs 55,000-crore debt.
The companies had approached CCI in October seeking the regulator's clearance on the deal.
As part of its process in this case, the Commission had also sought certain information from Ambuja Cements Ltd, ABG Cement Ltd and Lafarge India relating to their cement plants in Gujarat and Rajasthan.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
