New Delhi: Fair trade regulator CCI has approved stake purchase of Tata Group entities into auto component maker Varroc Engineering Pvt Ltd (VEPL) saying the deal will not have any 'adverse effect' on competition in the country.
Two Tata Group entities --Omega TC Holdings and Tata Capital Financial Services Ltd (TCFSL)--in January had announced that they would acquire certain number of equity and compulsory convertible preference shares of VEPL.
"Prior to and after the conversion of convertible preference shares, the likely shareholding of acquirers in VEPL would be in the range of nine to fifteen percent," Competition Commission of India (CCI) said.
"The Commission is of the opinion that the proposed combination is not likely to have an appreciable adverse effect on competition in India and therefore, the Commission hereby approves the same," CCI said in an order dated March 5.
VEPL is engaged in the business of auto components, while Omega and TCFSL are involved in investment and financial services respectively and are not directly engaged in the business of auto components.
As per the CCI, the ultimate parent company of TCFSL and other companies belonging to Tata group, together with other individuals, hold the entire share capital of Tata Auto Comp Systems Ltd (TACO), which is also an auto-component maker.
Besides, some of the products of TACO may be regarded as similar to the products manufactured by Varroc Polymers Pvt Ltd (VPPL), a company which belongs to the promoters of VEPL, the regulator said.
According to CCI, "auto-component sector in India is characterised by the presence of a large number of manufacturers...It is observed that in respect of identical /similar products between TACO and VPPL, the market share of VPPL is insignificant."
Further, regarding the auto components which are procured by Tata Motors from VEPL's subsidiaries, CCI said, "the quantum of sales of the subsidiaries of VEPL to TACO is relatively small and that there are other enterprises producing similar auto components with significant market shares in India."
First Published: Friday, March 7, 2014, 21:34