The boards of state-owned Power Finance Corporation (PFC) and REC Limited have approved a merger scheme under which REC will be absorbed into PFC, creating one of India’s largest infrastructure financing institutions with a combined loan book of more than **Rs 11 lakh crore.
The proposal, approved by the boards of both companies, will now require clearance from regulators, shareholders and creditors before it can be implemented.
According to separate stock exchange filings, the merger has been approved under Sections 230 to 232 of the Companies Act, 2013.
Under the scheme, REC will merge into PFC as the transferee company and will be dissolved without undergoing the process of winding up once the merger becomes effective.
Share Swap Ratio Finalised
Eligible REC shareholders will receive 88 equity shares of PFC for every 100 equity shares of REC held on the record date specified under the scheme.
The companies said the merger will take effect from the appointed date outlined in the approved scheme.
The share exchange ratio has been determined based on a joint valuation report prepared by Ernst & Young Merchant Banking Services LLP and RBSA Valuation Advisors LLP, with a fairness opinion provided by Nuvama Wealth Management Limited.
Larger Balance Sheet, Wider Financing Role
In a joint statement, the companies said the merger would create “a financing entity with an aggregate loan book of over Rs 11 lakh crore.”
REC said the combined institution would become the Government of India’s principal financing arm for implementing power sector reforms and flagship infrastructure programmes.
According to the company, the merged entity is expected to benefit from a stronger balance sheet, a larger capital base and improved operational efficiencies.
The companies believe the consolidation will enhance their ability to finance emerging sectors such as renewable energy, green hydrogen, energy storage, small modular nuclear reactors and grid modernisation.
A larger balance sheet is also expected to improve borrowing capacity and strengthen credit flow across the power sector.
Regulatory Approvals Still Pending
The merger remains subject to approvals from regulatory authorities, stock exchanges, shareholders and creditors.
REC said the scheme will be submitted to the stock exchanges to obtain the required no-objection certificates under SEBI’s Listing Regulations.
The companies also clarified that the merger is contingent upon the combined entity continuing to qualify as a government company, with the Government of India retaining majority ownership, voting rights and management control.
REC Approves Rs 1.4 Lakh Crore Fundraising Plan
Separately, REC’s board approved a proposal to raise up to Rs 1.40 lakh crore through the private placement of secured or unsecured non-convertible bonds or debentures.
The fundraising programme will be carried out in one or more tranches over a one-year period, subject to shareholder approval at the company’s upcoming annual general meeting.
If completed, the merger will create a significantly larger public sector lender focused on financing India’s expanding power and infrastructure sectors, while strengthening funding capacity for both conventional and clean energy projects.
