19 April, 2019
On February 02, 2019, CCI approved the acquisition by SVF Doorbell (Cayman) Limited (‘SVFD’ or ‘Acquirer’) of approximately up to 22.4% of shareholding of Delhivery Private Limited (‘DPL’) on a fully diluted basis (‘Proposed Combination’). [1] The Proposed Combination was notified to CCI pursuant the Memorandum of Understanding dated October 15, 2018, executed between Softbank Group entity and DPL (‘MoU’), Share Subscription Agreement (‘SSA’) and the Shareholders Agreement (‘SHA’), both dated December 20, 2018, executed between DPL and SVFD. The Proposed Combination also stipulated that a potential subsequent acquisition of additional equity securities by SVFD, from the existing security holders of DPL at such price and on such terms to be agreed between SVFD and such security holder (‘Step 2’), was to take place. However, given that the parties had not executed any binding document in relation to Step 2 (the SSA did not cover Step 2), as is required under Section 6(2) of the Act read with Regulation 5(8) of the CCI (Procedure in regard to the transaction of Business relating to Combinations) Regulations, 2011 (‘Combination Regulations’), CCI did not include Step 2 within its assessment of the Proposed Combination (even though the same was interconnected with the Proposed Combination).
SVFD has been established for the purposes of the Proposed Combination by SoftBank Vision Fund L.P. (‘SVF’). SVF is a venture capital investment fund, focused on making long-term financial investments in companies. Both SVF and SVFD are part of the SoftBank Group (‘SB Group’). DPL is engaged in the provision of third-party logistics (‘3PL’) services in India and provides transportation, warehousing, freight services, etc. to third-party enterprises/persons who operate across different business models and are present across the value chain. Additionally, through its wholly owned subsidiary Delhivery USA LLC, DPL also provides last mile logistics solution/deliveries of cross border shipments from India to the United States of America through the United States Postal Service. As per CCI, DPL has a minimal market share of zero to five percent in the overall logistics market and a share of zero to five percent for provision of 3PL services in India.
Based on the information provided by the parties to the Proposed Combination, CCI observed that there is no horizontal overlap between DPL and SVFD, SVF (neither SVF nor SVFD is engaged the provision of any services or sale of goods), or any of the subsidiaries, affiliates and portfolio companies of the SB Group, including those entities in which the SB Group has non-controlling investments or special rights.
Additionally, CCI also observed that although certain portfolio companies of SB Group were involved in the provision of ‘business-2-business’ (‘B2B’), ‘business-2-customers’ (‘B2C’) sales, supply of landline phones, IT peripherals, and provision of vehicles on contractual basis in India and the same may use 3PL services. However, given the minimal shares of DPL, and the presence of several enterprises in the market for logistics services, such as Gati, Xpressbees, etc., CCI held that the Proposed Combination was not likely to have any AAEC in India. Accordingly, CCI approved the acquisition under Section 31(1) of the Act.
The Proposed Combination also stipulated a non-compete clause (‘NCC’). CCI, without disclosing the duration and scope of the NCC observed that it was beyond what was necessary for the implementation of the Proposed Combination and to this extent was not ancillary to the Proposed Combination.
[1] Combination Registration No.C-2019/01/633
For further information, please contact:
Zia Mody, Partner, AZB & Partners
zia.mody@azbpartners.com
