PFC, REC boards approve merger to create Rs 11 lakh crore lender

In a historic development for India’s power sector, the boards of Power Finance Corporation Limited (PFC) and REC Limited have approved a Scheme of Merger under Sections 230 to 232 of the Companies Act, 2013, for the amalgamation of REC into PFC. According to the companies, the merger will create a government-owned financing entity with an aggregate loan book of over Rs 11 lakh crore.

Under the approved scheme, REC will merge into PFC on a going concern basis from the Appointed Date. Upon the scheme becoming effective, REC will be dissolved without being wound up and its eligible shareholders will receive PFC shares based on the approved share exchange ratio. No cash consideration will be paid as part of the transaction.

The approved share exchange ratio is 88 equity shares of PFC having a face value of Rs 10 each for every 100 equity shares of REC having a face value of Rs 10 each. The consideration shares will be issued to REC shareholders as on a record date to be determined later by the boards of both companies. PFC currently holds 52.63% of the share capital of REC on a fully diluted basis.

The merger proposal had earlier received the approval of the Hon’ble President of India. The Ministry of Power, through a letter dated June 10, 2026, communicated the approval of the competent authority for the proposed amalgamation. The proposal forms part of the government’s restructuring initiative for public sector non-banking financial companies (NBFCs) announced in the Union Budget 2026 under the “Viksit Bharat” framework. 

Merger rationale

According to the companies, the merger would strengthen institutional capacity for implementing government power sector programmes, improve balance sheet strength and financing capability, and support the capital investment required for the Viksit Bharat 2047 vision.

The companies stated that the merged entity would serve as a key financier of India’s energy transition and strategic infrastructure buildout, including generation, transmission, distribution, renewable energy, green hydrogen, energy storage, small modular nuclear reactors and grid modernisation. They also said the merger would improve financial flexibility, expand access to capital and enhance the ability to structure large infrastructure financings.

Approvals required

The scheme is subject to approvals from shareholders, creditors, stock exchanges and other regulatory and government authorities.

The merger also requires the merged entity to continue qualifying as a Government Company under the Companies Act, 2013, with the Government of India retaining majority voting rights and control, directly or indirectly.

The companies said the scheme will be submitted to BSE Limited and the National Stock Exchange of India Limited for obtaining their No Objection Letters under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Since both PFC and REC are public sector companies, the companies stated that certain related-party transaction provisions under the SEBI Listing Regulations do not apply to the merger. They also said the transaction is exempt from the requirements of Section 188 of the Companies Act, 2013, in accordance with the Ministry of Corporate Affairs’ General Circular No. 30/2014.

Financials and advisors

For FY 2025-26, PFC reported a standalone net worth of Rs 1,02,532 crore and consolidated net worth of Rs 1,73,441 crore. Its standalone turnover stood at Rs 58,504 crore, while consolidated turnover was Rs 1,15,444 crore.

REC reported a standalone net worth of Rs 84,290 crore and consolidated net worth of Rs 85,054 crore. Its standalone turnover was Rs 59,140 crore, while consolidated turnover stood at Rs 59,584 crore.

The companies appointed Deloitte Touche Tohmatsu India LLP as transaction and tax advisor, Cyril Amarchand Mangaldas as legal advisor, RBSA Valuation Advisors LLP and Ernst & Young Merchant Banking Services LLP for joint valuation reports, and SBI Capital Markets and Nuvama Wealth Management for fairness opinions.