PFC, REC Boards Approve Merger; Combined Lending Giant with ₹11 Lakh Crore Loan Book Set to Emerge – Indian PSU
The boards of Power Finance Corporation (PFC) and REC Limited have approved the long-awaited merger of the two state-owned power sector financiers, marking a significant milestone in the government’s efforts to consolidate public sector financial institutions. The merger will create India’s largest power sector financing company with a combined loan portfolio exceeding ₹11 lakh crore.
The merger will be implemented through the absorption of REC into PFC, with April 1, 2026, designated as the appointed date for the transaction. However, the scheme will come into effect only after obtaining approvals from shareholders, regulators, creditors, and other statutory authorities.
Share Swap Ratio Fixed at 88:100
Under the approved Scheme of Amalgamation, shareholders of REC 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 ₹10 per share.
The share exchange ratio has been determined based on an independent valuation carried out by RBSA Valuation Advisors LLP, while SBI Capital Markets Limited acted as the merchant banker for the transaction.
India’s Largest Power Sector Financier
The merger will bring together two of the country’s leading public sector lenders that finance projects across the entire power value chain, including thermal power, renewable energy, transmission, distribution, hydroelectric projects, battery energy storage systems, smart metering, and other energy infrastructure.
The combined entity is expected to have significantly enhanced financial strength, enabling it to support India’s growing investment requirements in the power and renewable energy sectors while improving operational efficiency through the elimination of overlapping functions.
Government to Retain Majority Control
Power Finance Corporation currently holds 52.6% equity in REC Limited, while the Government of India owns 55.99% of PFC. The Centre does not directly own shares in REC.
Following the merger, the combined institution will continue to function as a government-owned company, retaining sovereign backing and strengthening its role in financing India’s energy infrastructure and clean energy transition.
Multiple Approvals Still Required
Although the boards of both companies have approved the merger proposal, the transaction remains subject to approvals from:
- Shareholders of PFC and REC
- Stock exchanges
- Securities and Exchange Board of India (SEBI)
- National Company Law Tribunal (NCLT)
- Creditors, wherever applicable
- Other statutory and regulatory authorities
The merger follows the government’s earlier in-principle approval for the consolidation after receiving the President’s approval to proceed with the amalgamation process.
The proposed consolidation is expected to create a stronger and more efficient financing institution capable of supporting India’s expanding electricity demand, renewable energy ambitions, and large-scale infrastructure development.
