Goldman Sachs Investment Manager Fined ₹40 Lakh For Failing To Notify Biocon Biologics Deal
Goldman Sachs Investment Manager Fined ₹40 Lakh For Failing To Notify Biocon Biologics Deal
The Competition Commission of India (CCI) has imposed a penalty of Rs 40 lakh on Goldman Sachs (India) Alternative Investment Management Pvt Ltd (GS AIMPL), the investment manager of Goldman Sachs AIF, for failing to notify the regulator about a deal that dates back over four years. The deal, which gives Goldman Sachs AIF the option to buy up to a 3.81% stake in Biocon Biologics, involved the acquisition of Optionally Convertible Debentures (OCDs) issued by Biocon Biologics.
The penalty was levied for contravention of Section 6(2) of the Competition Act, which mandates prior approval for certain combinations. The regulator penalized GS AIMPL for failing to notify the transaction and rejected the argument that the deal was conducted in the ordinary course of business.
The CCI stated in a 13-page order that any transaction made with the intent to remain invested for a relatively longer period and involving the acquisition of additional rights, compared to those of an ordinary shareholder, cannot be considered as part of the ordinary course of business. It also emphasized that the regulatory framework applies equally to all enterprises, regardless of their organizational form.
The CCI noted that the acquisition of OCDs, and the associated rights, went beyond those typically available to ordinary shareholders. The debentures, upon conversion, would grant GS AIMPL a 3.81% stake in Biocon Biologics on a fully diluted basis, along with rights to access critical information and participate in key decisions of the company. These rights were seen as going beyond the standard protections available to minority investors.
Despite Goldman Sachs AIMPL's argument that the transaction was routine and did not grant control over Biocon Biologics, the CCI dismissed these claims. The regulator determined that the rights acquired allowed GS AIMPL to influence reserved matters, thus surpassing the threshold of a typical investment.
Consequently, the CCI imposed a penalty of Rs 40 lakh under Section 43A of the Competition Act. This section allows the CCI to impose fines of up to 1% of the total turnover or assets of the combination, whichever is higher, for failure to notify a transaction.
