Explained: What the PFC–REC merger means for investors, shareholders, and India’s power financing landscape

In a major consolidation move in India’s power financing sector, Power Finance Corporation (PFC) and REC Limited have secured formal board approval for their merger, paving the way for the creation of a single state-owned power sector financing giant with a combined loan book exceeding ₹11 lakh crore. 

The boards of both companies approved the merger scheme under Sections 230–232 and other applicable provisions of the Companies Act, 2013. The transaction will see REC merge into PFC on a going concern basis through a merger by absorption. Here’s what investors and shareholders need to know. 

What has been approved? 

Both companies’ boards have cleared a scheme of arrangement under which REC will be merged into PFC, along with their respective shareholders and creditors. 

Under the structure, PFC will act as the transferee company while REC will be the transferor company. 

Once the merger takes effect, REC will cease to exist as a separate legal entity and will be dissolved without undergoing a winding-up process. 

What is the share swap ratio? 

REC shareholders will receive: 

88 equity shares of PFC (face value ₹10 each) for every 100 equity shares of REC (face value ₹10 each). 

PFC will issue fresh shares to REC shareholders in line with this approved exchange ratio. 

When will shareholders get new shares? 

The record date for determining eligible REC shareholders has not yet been announced. 

The boards of both companies will decide and communicate the record date at a later stage. 

Will government control continue? 

Yes. 

The merged entity will continue to retain its status as a government company under the Companies Act, 2013, subject to regulatory approvals. The Government of India will continue to hold majority voting rights and maintain control, either directly or indirectly, after completion of the merger. 

What approvals are still pending? 

The merger is not effective immediately. 

It remains subject to multiple approvals, including: 

Approval from shareholders of both companies 

Approval from creditors 

Regulatory clearances 

Government approvals 

Other statutory approvals as required 

Only after these conditions are fulfilled will the merger become operational. 

Why is the merger significant? 

The move represents the next phase of integration between the two public sector lenders. 

Back in March 2019, PFC acquired the Centre’s 52.63% stake in REC for around ₹14,500 crore, making REC its subsidiary. The proposed merger is expected to simplify the group structure, consolidate lending operations and create a larger balance sheet to support India’s growing power and infrastructure financing needs. 

With a combined loan portfolio of over ₹11 lakh crore, the merged entity is expected to emerge as one of the country’s largest specialised infrastructure financiers focused on the power sector.