PFC, REC Shares Slip as Presidential Approval is Granted for Proposed Merger Plan
Power finance giants Power Finance Corporation (PFC) and REC Ltd saw their shares decline on Thursday following the official approval of the proposed merger plan by the President of India. Despite the government moving significantly closer to consolidating both key lenders, both stocks traded lower in afternoon sessions. PFC shares fell up to 4.2 percent, hitting Rs 413.40, while REC dropped 3.6 percent, settling at Rs 336.40.##Stock Performance After Merger Approval
The announcement of the merger's presidential approval did not translate immediately into a rally for market participants. Both companies informed stock exchanges on Wednesday regarding the milestone. The stock depreciation indicates that investors are awaiting crucial details before reacting strongly to the consolidation news. PFC held a market capitalization exceeding Rs 1.35 lakh crore as of Thursday, and REC’s value stood at over Rs 88,600 crore.
##Details of the Proposed Infrastructure Consolidation
The proposed merger aims to create one of India's largest infrastructure financiers. Combining their strengths, the entity is expected to possess a loan book exceeding Rs 10 lakh crore. This massive scale will significantly strengthen the consolidated company’s ability to fund vital power transmission and renewable energy projects across the country.
This amalgamation directly aligns with earlier pronouncements from the Union Budget 2026-27. Finance Minister Nirmala Sitharaman had outlined plans for strengthening public sector NBFCs through consolidation and improved operational efficiency in her Budget speech. The merger is positioned as a primary step toward achieving greater scale and efficiency within these institutions.
##Background of PFC and REC Amalgamation
The intention to merge began gaining momentum earlier this year when the PFC board granted in-principle approval for the amalgamation of REC with itself on February 9. This proposal follows the larger government objective to bolster public sector financial players through streamlined structures.
The two companies share an established operational history, as PFC had acquired a 52.63 percent stake in REC from the Government of India back in March 2019. For Rs 14,500 crore, this acquisition made REC a subsidiary under the control of PFC, building a relationship that precedes the merger proposal.
##Future Road Map and Share Swap Clarity
Once the merger becomes legally effective as per applicable laws, all assets and liabilities associated with REC will be fully transferred to PFC. Following this transfer, REC is slated for dissolution in accordance with Sections 230-232 of the Companies Act, 2013. Meanwhile, PFC will continue its operations as a government-owned entity post-amalgamation.
The market is currently awaiting crucial clarity regarding the share swap ratio necessary for the transaction. This detail is yet to be disclosed and is expected to be determined by independent valuers as part of the ongoing merger process.
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