PFC and REC Merger Approved: Power Giant to Surge with Rs 11 Lakh Crore Combined Loan Book; Share Swap Fixed at 88:100

PFC and REC Merger Approved: Power Giant to Surge with Rs 11 Lakh Crore Combined Loan Book; Share Swap Fixed at 88:100​

Board Approves Landmark Merger of State-Owned Financiers​

Power Finance Corporation (PFC) and Rural Electrification Corporation (REC Ltd) have successfully approved the long-awaited scheme for their merger. This move is set to create a formidable power sector financing giant, combining two major state-run lenders into one entity. The companies announced the approval in a late-night exchange filing on June 28.

The merger involves REC integrating into PFC. Both boards ratified the Scheme of Merger under Sections 230 to 232 of the Companies Act, 2013. This move aligns with Finance Minister Nirmala Sitharaman’s earlier announcement in the Union Budget 2026 regarding restructuring state-owned power financiers to improve scale and efficiency.

Understanding the Share Exchange Mechanism​

The approved scheme details how shareholders will participate in the consolidation. Under the proposed plan, REC shareholders are entitled to receive 88 equity shares of PFC for every 100 equity shares of REC they hold. The share exchange ratio was fixed as part of the board approval.

A record date for this share swap will be announced later by both companies' respective boards. It is important to note that the merger remains subject to several statutory and regulatory clearances, including sign-offs from shareholders, creditors, and various government authorities.

Scale and Significance of the Combined Entity​

The consolidation of PFC and REC is expected to yield a significantly larger financial entity. The combined operations are projected to hold an aggregate loan book exceeding Rs 11 lakh crore. This scale enhancement aims at bolstering both operational efficiency and market presence in the power finance sector.

The companies stressed that the successful completion of the merger hinges on specific conditions. One critical condition is that the merged entity must continue qualifying as a government company under the Companies Act, ensuring the Government of India retains majority voting rights and control over the new organization.

Transaction Advisors and Implementation Roadmap​

Several advisory firms were instrumental in finalizing this complex transaction. Deloitte Touche Tohmatsu India LLP served as the transaction and tax advisor for both organizations. Cyril Amarchand Mangaldas was appointed as the legal advisor for PFC and REC.

Valuation and fairness opinions were also secured by specialized firms. RBSA Valuation Advisors LLP and Ernst &Young Merchant Banking Services LLP prepared the joint valuation reports. SBI Capital Markets and Nuvama Wealth Management provided the necessary fairness opinions for PFC and REC, respectively.

The indicative implementation roadmap suggests that the merger is targeted for completion by April 1, 2027, pending approvals from the Department of Investment and Public Asset Management (DIPAM). Earlier, the draft scheme was slated for finalization in June, with regulatory clearances anticipated by early 2027.