Bharat Forge to let recently acquired AAM India operate as independent entity till 2031

Bharat Forge secured a CCI approval for the deal in April.

Bharat Forge has agreed to several tweaks to secure the approval of Competition Commission of India (CCI) for its Rs 746-crore acquisition of AAM India.

It has agreed to ensure that AAM India operates as an independent entity, competing with Bharat Forge’s existing subsidiaries, including its Cummins ventures, until 2031, the latest combination order published by CCI shows.

These voluntary tweaks were made after the antitrust watchdog flagged the impact of the deal on the competition in the axle market in India.

“BFL(Bharat Forge) commits to ensure that Target(AAM India) continues to operate independent of the BFL’s Affiliate JVs and operates in compliance with legal requirements of the Competition Act, 2002,”  the CCI has said in its order made public recently. “BFL commits that the Target will retain its full operational independence post-combination, ensuring that competition with the BFL’s Affiliate JVs remains unaffected.”

Bharat Forge has also given the assurances that it will not appoint full-time directors or managers to AAM India and the acquired entity will retain its distinct brand identity despite becoming a wholly-owned subsidiary.

To enforce these terms, the CCI has mandated the appointment of an independent monitoring authority, effective until 2031, to ensuring Bharat Forge adheres to its commitments.

Bharat Forge finalised the Rs 746-crore acquisition of AAM India in June and is expanding its automotive product portfolio. While the CCI's order permitting the combination with these voluntary tweaks was passed on April 22, the detailed final order was made public recently.

At the core of the CCI’s scrutiny were concerns regarding the potential impact on competition. According to the CCI order, Bharat Forge and its affiliates collectively hold a 35-40 percent share in the market for axles for medium and heavy commercial vehicles (MHCVs). AAM India commands another 25-30 percent, resulting in a combined dominance of 60-65 percent.

This contrasts sharply with the next significant players, Dana and ZF India, each accounting for less than 5 percent market share.

Similarly, in the broader commercial vehicle axle market, Bharat Forge’s 11-15 percent market share combined with AAM India’s 15-20 percent adds up to 30-35 percent. The CCI said all other companies in the segment hold less than 10 percent market share.

To safeguard its independence, AAM India will not share any board members, key managerial personnel (KMPs), or senior employees with Bharat Forge, CCI said. Commercially sensitive information pertaining to AAM India will be ring-fenced, with Bharat Forge receiving only restricted access to such data. Any Bharat Forge personnel granted access will be bound by non-disclosure agreements (NDAs), it added.

At 2.55 pm, the Bharat Forge stock was trading at Rs 1,190.20 on the National Stock Exchange, down  1.15 percent from the previous close amid broader weakness in the market.