PFC-REC Merger Approved: Share Swap Ratio as Rs 11 Lakh Crore Lending Mega Power Finance Entity Set to Emerge

The boards of state-owned lenders Power Finance Corporation (PFC) and REC Ltd approved their long-awaited merger proposal. The move marks the first major corporate milestone in the consolidation process and paves the way for the creation of the country's largest power sector financing institution, with a combined loan portfolio exceeding Rs 11 lakh crore.

PFC, REC Boards Approve Merger Proposal; Combined Loan Book to Cross Rs 11 Lakh Crore

The merger is expected to strengthen financing for India's rapidly expanding power and renewable energy sectors while creating a larger, more efficient government-backed lender capable of funding large-scale infrastructure projects. However, the amalgamation will become effective only after receiving approvals from shareholders, regulators and other statutory authorities.

PFC-REC Merger Approved: Share Swap Ratio Fixed at 88:100

As per the scheme approved by both boards, REC Ltd will be merged into Power Finance Corporation through an absorption route, with April 1 designated as the appointed date for the transaction.

Under the approved share exchange ratio, REC shareholders will receive 88 fully paid-up equity shares of PFC for every 100 fully paid-up equity shares of REC, with both companies having a face value of Rs 10 per share.

The approved ratio was determined after an independent valuation exercise conducted by RBSA Valuation Advisors, while SBI Capital Markets acted as the merchant banker for the proposed transaction.

Why the PFC-REC Merger Matters

The merger will bring together two of India's most important public sector financiers, both of which play a crucial role in funding the country's electricity ecosystem.

Together, the two companies finance projects across thermal power, renewable energy, transmission networks, power distribution, smart metering, battery storage, hydroelectric projects and other critical infrastructure.

With India's electricity demand continuing to rise and investments accelerating in clean energy and grid modernisation, the combined entity is expected to have greater lending capacity and a stronger balance sheet to support large, long-term infrastructure projects.

Industry observers believe a unified institution will also improve operational efficiency by reducing overlap between the two government-owned lenders while enhancing their ability to finance India's ambitious energy transition goals.

Government to Continue Control After REC-PFC Merger

Power Finance Corporation currently holds 52.6% of REC Ltd, while the Government of India owns 55.99% of PFC. The Centre does not directly hold equity in REC.

Following the merger, the combined institution will continue to operate as a government company, ensuring continued sovereign backing for one of the country's most strategically important financial institutions.

The consolidation also aligns with the government's broader strategy of strengthening public sector financial institutions by combining entities with similar business models and expanding their ability to fund priority infrastructure sectors.

Merger Still Requires Multiple Regulatory Approvals

Although both companies have approved the scheme, the merger is still subject to several regulatory clearances before it can be implemented.

The proposal must now receive approvals from shareholders of both companies, stock exchanges, the Securities and Exchange Board of India (SEBI), the National Company Law Tribunal (NCLT), creditors wherever applicable, and other statutory authorities.

Earlier, both boards had granted in-principle approval for the consolidation, following which the government secured the President's approval to proceed with the amalgamation process.

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