New Delhi: In a major development for India’s power sector and public sector financial institutions, the Boards of Directors of Power Finance Corporation Limited (PFC) and REC Limited (REC) have approved the Scheme of Merger under which REC will be merged into PFC. The proposed merger is expected to create one of India’s largest government-owned infrastructure financing institutions with an aggregate loan book exceeding ₹11 lakh crore.
The merger has been approved under Sections 230 to 232 and other applicable provisions of the Companies Act, 2013. However, the scheme will become effective only after receiving all statutory, regulatory, governmental, shareholder and creditor approvals.
Merger to Create India’s Largest Power Sector Financing Entity
According to the approved scheme, REC will merge into PFC, making PFC the surviving entity. The combined organisation will have a loan portfolio of over ₹11 lakh crore, significantly strengthening its ability to finance India’s growing power, renewable energy and infrastructure sectors.
The merger is expected to improve operational efficiency, reduce duplication, optimise capital utilisation and create greater financial strength for lending to strategic infrastructure projects.
Read Also: REC–PFC Merger Gets Presidential Approval, Set to Create India’s Largest Power Financing Entity
Government to Continue Majority Ownership
The merger proposal contains an important condition that the merged company must continue to qualify as a Government Company under the Companies Act, 2013.
The Government of India will continue to retain majority voting rights and management control, either directly or indirectly, even after completion of the merger.
The transaction is also subject to approvals from:
- Shareholders of both PFC and REC
- Creditors of both companies
- Relevant regulatory authorities
- Government of India
- Other statutory authorities as required under law
Only after all approvals are obtained will the merger become effective.
Share Exchange Ratio Finalised
The Boards have also approved the share exchange ratio based on the joint valuation report.
Under the approved scheme:
- REC shareholders will receive 88 equity shares of PFC (Face Value ₹10 each) for every 100 equity shares of REC (Face Value ₹10 each).
The exchange will be applicable to shareholders whose names appear on the record date, which will be determined later by the Boards of PFC and REC.
Advisors Appointed for the Merger
Several leading advisory firms were engaged for valuation, legal support and transaction execution.
Transaction & Tax Advisor
- Deloitte Touche Tohmatsu India LLP
Legal Advisor
- Cyril Amarchand Mangaldas
Valuation Advisors
- RBSA Valuation Advisors LLP (appointed by PFC)
- Ernst & Young Merchant Banking Services LLP (appointed by REC)
These firms jointly prepared the valuation report used to determine the share exchange ratio.
Fairness Opinion Advisors
- SBI Capital Markets Limited (appointed by PFC)
- Nuvama Wealth Management Limited (appointed by REC)
Both institutions issued independent fairness opinions on the joint valuation reports.
Merger Subject to Multiple Regulatory Approvals
Despite the Board approvals, the merger has not yet become effective.
The proposal will require clearances from multiple authorities before implementation, including corporate, regulatory and governmental approvals. Shareholders and creditors of both companies will also have to approve the scheme.
Only after completion of these formalities will the merger legally take effect.
Strategic Significance of the Merger
The proposed merger represents one of the biggest consolidation exercises among India’s public sector financial institutions.
By combining the strengths of PFC and REC, the government aims to create a stronger financing institution capable of supporting large-scale investments in:
- Power generation
- Transmission infrastructure
- Distribution reforms
- Renewable energy projects
- Green energy transition
- Infrastructure financing
A larger balance sheet and consolidated operations are also expected to improve efficiency, enhance lending capacity and strengthen the financial position of the merged entity.
What Happens Next?
Following the Board approvals, the merger proposal will move through the statutory approval process.
Once all required approvals are obtained and the scheme is sanctioned, REC will officially merge into PFC, and REC shareholders will receive PFC shares according to the approved exchange ratio of 88:100.
The Government of India will continue to remain the majority shareholder, ensuring the merged company retains its status as a government-owned enterprise.
About REC Limited
REC Limited is a Maharatna public sector enterprise under the Ministry of Power that provides financial assistance for power sector projects across India, including generation, transmission, and distribution infrastructure, as well as renewable energy initiatives.
About Power Finance Corporation
Power Finance Corporation is a leading non-banking financial company (NBFC) under the Government of India that primarily finances power sector projects, supporting infrastructure development, capacity expansion, and clean energy initiatives across the country.
Read Also: REC–PFC Merger Proposal Approved for Presidential Nod; Board Clears Key Structural Steps
