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The boards of Power Finance Corporation (PFC) and REC have approved a merger scheme that will create a combined financing entity with a loan book exceeding INR 11 lakh crore, strengthening India's power sector financing ecosystem. Under the approved share exchange ratio, REC shareholders will receive 88 PFC equity shares for every 100 REC shares held, subject to shareholder, creditor and regulatory approvals. The merger is also contingent upon the merged entity continuing to qualify as a Government Company with majority government ownership, and is expected to enhance financing capacity for the country's expanding power and infrastructure sectors.
The boards of Power Finance Corporation (PFC) and REC Limited have approved a scheme of merger that will combine the two public sector lenders into a single entity with an aggregate loan book exceeding INR 11 lakh crore. The proposed merger marks one of the most significant consolidations in India's power sector financing landscape and is expected to strengthen the government's ability to fund large-scale infrastructure and energy projects.
According to the approved scheme, REC will merge into PFC under Sections 230 to 232 of the Companies Act, 2013. Once completed, the merged organisation will become one of India's largest infrastructure financing institutions, providing financial support across the power generation, transmission, distribution and renewable energy segments.
The merger, however, remains subject to several statutory approvals. These include consent from shareholders and creditors of both companies, along with approvals from the relevant regulatory and government authorities. In addition, the transaction is conditional upon the merged organisation continuing to qualify as a Government Company, with the Government of India retaining majority voting rights and control, either directly or indirectly.
As part of the transaction, the companies have finalised a share exchange ratio under which REC shareholders will receive 88 fully paid equity shares of PFC for every 100 fully paid equity shares of REC held on a record date that will be determined later by the boards of the two companies. The ratio has been arrived at following an independent valuation process supported by external advisors.
Several professional firms have been involved in structuring the transaction. Deloitte Touche Tohmatsu India LLP has acted as the transaction and tax advisor, while Cyril Amarchand Mangaldas served as the legal advisor to both companies. Independent valuation reports were prepared jointly by RBSA Valuation Advisors LLP for PFC and Ernst & Young Merchant Banking Services LLP for REC. SBI Capital Markets and Nuvama Wealth Management provided fairness opinions for their respective companies.
PFC and REC have long played complementary roles in financing India's power sector, supporting projects across conventional and renewable energy, transmission networks, distribution reforms and power infrastructure. The merger is expected to create a stronger institution with enhanced financial capacity, greater operational efficiency and an expanded ability to mobilise resources for the country's growing infrastructure requirements.
Industry observers believe the combined entity could benefit from economies of scale, streamlined operations and improved capital allocation while strengthening India's energy financing ecosystem. A larger balance sheet may also improve the institution's ability to support long-gestation infrastructure projects aligned with the country's energy transition and economic growth objectives.
Once all regulatory and shareholder approvals are secured, the merger is expected to create a unified public sector financing institution capable of supporting the government's long-term infrastructure and power sector development agenda while reinforcing financial stability within the sector.
Source- PIB
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