Fair trade regulator Competition Commission of India (CCI) has given its approval for the proposed joint venture between Japanese major Sumitomo Corp and India's Mukand Ltd for making certain steel products.
The CCI said it has observed that the deal would not have any adverse impact on competition scenario in the country.
Both the companies had entered into a "Master Agreement" to jointly manufacture bright bars and wires in India through Technosys Metal Processing, a subsidiary of Mukand in October, 2012.
"... considering the size of the business of Mukand and Sumitomo Corp in the Steel sector in India, this vertical
relationship between the parties to the combination along with their group entities would not raise any competitive concern in the markets of long steel products in India," CCI said in an order on December 18.
Already, there many players -- including large integrated entities -- in the long steel products segment.
As per the deal, 39.92 per cent stake in Technosys Metal Processing would be transferred to Sumitomo Corp and its Singapore-based arm Sumitomo Corp Asia.
Individually, Sumitomo Corp and its subsidiary Sumitomo Corp Asia would own 25 per cent and 14.92 per cent stake respectively in Technosys Metal Processing.
On the other hand, Mukand and its affiliates would hold 60.08 per cent shares in the entity after the transfers.
"As per the information given in the notice, the Master Agreement confers certain rights to Sumitomo Corporation which would enable it to exercise joint control over the management and affairs of Technosys along with Mukand," CCI said.
In India, Sumitomo Corp has presence in many sectors, including steel and mineral resources. Sumitomo Corp Asia is an investment holding company.
Mukand has operations in steel products, industrial machinery and road construction segments. Their steel products include blooms, bars and wire rods. Technosys is into making bright bars and wires, among others.
According to the joint venture, the raw material requirements for the production of bright bars and wires would be provided by Mukand, while Technosys would utilise Sumitomo Corp's global sales and distribution network for the export of the products manufactured by it with its technical and financial expertise.
The companies had approached CCI for approval on November 23, 2012.