Summary of this article
Shareholders will receive 88 shares of PFC for every 100 shares of REC
This marks major consolidation in the country's power finance sector
Public-sector lenders Power Finance Corp. (PFC) and REC Ltd have approved a merger scheme that will create India's largest power sector financing institution with a combined loan book of more than Rs. 11 lakh crore. The boards of both companies cleared the proposal on June 28, marking a major consolidation in the country's power financing space.
Under the approved scheme, subsidiary REC will be merged into the parent company, PFC. The merger is aimed at improving operational efficiency, enhancing lending capabilities and creating a larger institution capable of supporting India's rapidly expanding power and infrastructure requirements. The combined entity is expected to play a crucial role in financing conventional and renewable energy projects across the country.
Share Swap Ratio Fixed at 88:100
As part of the merger arrangement, shareholders of REC will receive 88 equity shares of PFC for every 100 equity shares held in REC. The record date for the share swap will be announced later by the boards of the two companies.
"The share exchange ratio for the proposed merger of REC into PFC shall be 88 equity shares of PFC of Rs 10 each fully paid up for every 100 equity shares of REC of Rs 10 each," the companies informed the stock exchanges.
The companies have clarified that the merger remains subject to several statutory and regulatory approvals, including clearances from shareholders, creditors and other government authorities. Another key condition is that the merged entity must continue to qualify as a government company, with the Government of India retaining majority voting rights and control, either directly or indirectly.
Strategic Move to Strengthen Power Financing
The merger is part of the government's broader strategy to strengthen public sector non-banking finance companies by creating larger and more efficient institutions. PFC already owns a 52.63 per cent stake in REC, having acquired the controlling stake from the government in 2019.
Industry experts believe the consolidation will result in a stronger balance sheet, greater capital efficiency and an enhanced ability to fund large-scale projects in power generation, transmission, distribution and renewable energy. The combined entity is also expected to achieve operational synergies and reduce duplication in functions, making it better positioned to support India's long-term energy transition and infrastructure development plans.
Following the announcement, shares of both PFC and REC remained in focus, with investors assessing the implications of the merger and the share exchange arrangement on future valuations and growth prospects. Shares of REC ended 0.1 per cent higher at Rs. 365 a piece on the NSE, while shares of PFC ended 1.9 per cent lower at Rs. 424.4 per share on June 29.
