Power Finance Corporation (PFC) has approved the merger of REC Limited into PFC. Shareholders will receive 88 PFC shares for every 100 REC shares. The combined entity will have a loan book exceeding ₹11 lakh crore.
PFC to Merge with REC, Creating Power Financing Giant
Power Finance Corporation Ltd (PFC) has approved a significant merger by absorption with REC Limited. Under the terms, REC will be absorbed into PFC. The approved share exchange ratio is 88 equity shares of PFC for every 100 equity shares of REC. No cash consideration will be paid.
What just happened
The Board of Directors of PFC has approved the merger of REC Limited into PFC. The combined entity is projected to have a loan book exceeding ₹11,00,000 crore. For every 100 shares of REC, shareholders will receive 88 shares of PFC.
Why this matters
This merger aims to create a unified financial institution to drive government reforms and energy transition goals in the power sector. The consolidated entity will possess an enhanced scale with a significant loan book, improved operational efficiency, diversification into new energy areas like green hydrogen, and greater balance sheet strength for larger project financing.
The backstory
Both PFC and REC are prominent public sector undertakings in the power financing sector. This merger represents a strategic consolidation to create a stronger financial powerhouse capable of supporting India's growing energy infrastructure needs and its transition to greener energy sources.
What changes now
REC Limited will be dissolved without winding up, becoming part of PFC. The merger is subject to regulatory and stakeholder approvals, including shareholders and creditors. A record date for the share exchange is yet to be announced by the Boards of both companies. The merger is being executed under Sections 230 to 232 of the Companies Act, 2013.
Risks to watch
Key risks include the timeline for obtaining necessary regulatory and NCLT approvals, potential integration challenges, and the eventual announcement of the record date for the share swap, which will determine the exact shareholding post-merger.
Peer comparison
While PFC and REC are unique entities in their focused domain of power sector financing, the consolidated entity will become a dominant player. Its scale will be considerably larger than other financial institutions primarily focused on infrastructure lending.
Context metrics (FY 2025-26)
Standalone Net Worth: PFC ₹1,02,532 crore, REC ₹84,290 crore. Standalone Turnover: PFC ₹58,504 crore, REC ₹59,140 crore. Consolidated Net Worth: PFC ₹1,73,441 crore, REC ₹85,054 crore.
What to track next
Investors should monitor upcoming filings related to regulatory clearances (NCLT), announcements on the merger's effectiveness timeline, and the crucial announcement of the record date for the share exchange.
Reader Takeaway: A stronger, larger financial entity is forming to fund India's power sector growth, but regulatory approvals are key.