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Fair trade regulator Competition Commission of India (CCI) today said it has approved engineering major L&T’s proposed buyout of 50 per cent stake held by Japanese giant Komatsu in their joint venture for manufacturing of hydraulic excavators.
Larsen & Toubro (L&T) and Komatsu hold 50 per cent stake each in their joint venture, L&T Komatsu Ltd (LTK), and the Indian corporate giant has now proposed to buyout Komatsu’s stake to take its holding to 100 per cent in this venture.
Komatsu holds this stake through its Singapore-based construction and mining equipment unit, Komatsu Asia Pacific.
After looking into the application seeking CCI approval for the deal, the fair trade regulator said in its order, dated April 9 and released today, that “the proposed combination is not likely to have an appreciable adverse effect on competition in India”.
“...the Commission hereby approves the proposed combination,” it added.
Following the acquisition, L&T Komatsu — which is engaged in the business of manufacturing hydraulic excavators, used in the construction and mining sectors — would come under the sole control of L&T.
As per the details submitted to CCI, hydraulic excavators sold by L&T Komatsu constituted around 23 per cent of the total hydraulic excavators sold in India in fiscal 2011-12.
It also said that following buyout, the technology licensed to L&T Komatsu would be given back to Komatsu.
The CCI observed that L&T Komatsu manufactured most of the hydraulic excavators using the Komatsu technology and only a few using its own technology and that L&T was only providing marketing and after sales services for the products.
According to CCI, “L&T did not manufacture hydraulic excavators except through L&T Komatsu, the exit of Komatsu from L&T Komatsu, consequent to the proposed combination, is not likely to raise any competition concern”.
L&T has submitted to CCI that to meet the Indian market requirements and till Komatsu sets its own manufacturing units in the country, both firms could also enter into certain transition arrangements, under which L&T Komatsu or its successor would provide contract manufacturing services to Komatsu India for 3-4 years.
Further, it is proposed that L&T would market and sell the products of Komatsu India and Komatsu would also provide after sales support, among other things.
L&T had approached CCI for its approval on March 14 this year pursuant to the execution of its share purchase agreement with Komatsu Asia Pacific earlier that month.
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