Lakshmikumaran & Sridharan assists merger of two warehouse PSUs

Lakshmikumaran & Sridharan assists CWC merger

Lakshmikumaran & Sridharan (LKS) advised public sector undertaking (PSU) Central Warehousing Corporation (CWC) acquire the business of counterpart Central Railside Warehouse Company (CRWC) via a slump sale on October 31 2022.

The sale is pursuant to execution of the business transfer agreement and other ancillary agreements and documents. As CWC is the sole shareholder of CRWC, all the assets, liabilities, rights and obligations shall be transferred to it.

LKS advised the two PSUs on legal, tax, structuring and regulatory aspects of the transaction, as well as conducting due diligence of both firms.

In a bid to improve efficiency and reduce costs, the Indian government approved the merger of the two PSUs in mid-2021.

While CWC was incorporated under the Warehousing Corporations Act, 1962, the CRWC is a mini-Ratna PSU established in 2007. The government’s decision is in line with its “Minimum Government Maximum Governance” policy to promote the ease of doing business and bringing private sector efficiencies into PSUs.

The move would unify warehousing, handling and transportation by means of transferring ownership from CRWC to CWC so that the supply chain management system and rail-based logistics operations are conducted seamlessly.

The CWRC currently operates 20 warehouses across the country. On the cost side, the merger is expected to reduce expenses on the rail-side warehouse complexes by INR50 milion each annually. Better capacity utilisation of the rail-side warehouses is another objective to ensure more commodities can be stored in addition to cement, sugar, salt, fertiliser and soda.