REC Ltd Merging into PFC in Approved Scheme; Boosted Capital Structure and Future Funding Planned

REC Ltd Merging into PFC in Approved Scheme; Boosted Capital Structure and Future Funding Planned​

The Board of Directors of REC Limited has approved a scheme for the merger by absorption into Power Finance Corporation Limited (PFC). The move is set to consolidate both entities, aiming to strengthen the capital base and enhance operational efficiencies across the power sector.

Under the Scheme, constituted as decided by the Board meeting held on June 28, 2026, REC will be absorbed by PFC. The merger provides for the dissolution of REC without being wound up. Eligible shareholders of REC will receive Consideration Shares from PFC at a specified ratio.

The share exchange ratio mandates that for every 100 equity shares of REC (each fully paid up at INR 10), shareholders will receive 88 equity shares of PFC (each fully paid up at INR 10). There is no cash consideration associated with the transaction. Upon the Scheme becoming effective, PFC will issue these shares to REC shareholders as on the Record Date, and the equity shares of REC will be cancelled.

Financial Overview Before Merger​

The companies involved in the merger—REC Limited (Transferor Company) and Power Finance Corporation Limited (Transferee Company)—have substantial financial standing, reflecting their roles as major players in infrastructure financing. The consolidated financials for both entities are detailed below:

Sector Role and Strategic Rationale​

Both REC and PFC are identified as leading entities in infrastructure financing. REC operates as a Maharatna Central Public Sector Enterprise, focusing on power sector financing and non-power infrastructure sectors such as Roads and Highways, Railways, and Ports. Similarly, PFC is recognized as India's largest government-owned NBFC within the power sector.

The merger is driven by several strategic objectives to benefit the energy transition and national development goals:

• Policy Implementation: The combined entity aims to serve as the Government's principal instrument for implementing power sector reforms and flagship programs, translating national policy into sectoral outcomes.
• Capital Strength: The merged entity is anticipated to gain improved balance sheet strength and a stronger capital base, enabling large-scale funding across the power value chain.
• Energy Transition: The combined scale will allow the entity to become a key financier of India's energy transition, supporting generation, transmission, distribution, renewable energy, green hydrogen, and grid modernization technologies.

Future Fundraising Plans​

In addition to the merger, the Board also considered a proposal for future fundraising. It was proposed that the companies raise funds through a Private Placement of Unsecured or Secured Non-Convertible Bonds or Debentures up to ₹140,000 crore. This funding is contingent upon shareholder approval in the ensuing Annual General Meeting and will be executed in one or more tranches over a period of one year from the date of passing the resolution by shareholders.

RECLTD Stock Price Movement​

On Thursday, REC Limited shares edged higher by 0.21% to settle at ₹364.65. The stock traded a volume of 6.47 million shares during the session.