The boards of state-run Power Finance Corporation (PFC) and REC Ltd have approved their pending merger, which will result in the formation of one of the biggest financial institutions in the power sector with combined loan book of Rs 11 lakh crore.
Key Highlights
- PFC and REC merger approved to create Rs 11 lakh crore power finance giant, pending regulatory and shareholder clearances.
- REC shareholders will receive 88 PFC shares for every 100 shares under the approved merger scheme.
As per the approved Scheme of Merger, the REC will be merged with PFC through the amalgamation process as provided in Sections 230 to 232 of the Companies Act, 2013. Once the transaction becomes effective, REC will cease to exist as a separate legal entity without undergoing liquidation. For every 100 REC shares held by the shareholders, they will get 88 equity shares of PFC, the record date for which will be announced later.
Merger to Strengthen India's Power Financing Ecosystem
The proposed consolidation is likely to considerably boost the energy financing space in India by forming a bigger energy institution with higher capital, better efficiencies and higher lending capacity. The combined entity is expected to be crucial for financing India's energy transition, such as renewable energy, green hydrogen, storage solutions, modernization of electricity grids, and new technologies like small modular nuclear reactors.
According to the companies, the deal will also bolster the government's push for significant reforms in the power sector and flagship infrastructure projects along with boosting access to affordable finance.
Share Swap Ratio Based on Independent Valuation
The approved exchange ratio was determined through a joint valuation exercise conducted by Ernst & Young Merchant Banking Services LLP and RBSA Valuation Advisors LLP, with an independent fairness opinion provided by Nuvama Wealth Management Ltd.
Also Read: Power Finance Corporation Appoints Consultants for REC Merger Process
REC Plans Rs 1.40 Lakh Crore Fundraising
The board of REC also passed a resolution to sell up to Rs 1.40 lakh crore in private placements of secured or unsecured non-convertible bonds and debentures in the coming year. Fundraising plan is still pending for shareholder approval at the upcoming Annual General Meeting of the company.
Regulatory Approvals Remain Key
The merger will be made possible only after the approvals from the shareholders, the creditors, the stock exchanges, the SEBI and other regulatory bodies. The two companies also said the merged entity will remain as a-government owned company, where the Government of India will have majority voting rights and shares.
The consolidation marks a significant step in the government's strategy to strengthen public sector financial institutions supporting India's rapidly expanding power and infrastructure sectors. Analysts believe the merger will enhance financing capacity while improving operational synergies and long-term efficiency in funding the country's clean energy ambitions.
