PFC & REC Boards Approve Merger Scheme to Create ₹11 Lakh Cr Financing Entity
The Boards of Directors of Power Finance Corporation Limited (PFC) and REC Limited (REC) have approved a comprehensive Scheme of Merger under which REC, the transferor company, will be merged into PFC, the transferee company. The proposed merger, approved under Sections 230 to 232 and other applicable provisions of the Companies Act, 2013, marks a significant milestone in India’s power sector financing landscape and is expected to create one of the country’s largest government-owned financial institutions.
Following the merger, the combined entity will have an aggregate loan book exceeding ₹11 lakh crore, substantially strengthening its financial capacity to support India’s rapidly expanding infrastructure and energy sectors. The consolidation is expected to enhance operational efficiency, optimize capital allocation, and improve the merged institution’s ability to finance large-scale projects aligned with the Government of India’s development priorities.
The proposed merger is subject to multiple statutory, regulatory, and corporate approvals before it can become effective. These include approvals from the shareholders and creditors of both PFC and REC, as well as the necessary clearances from relevant regulatory and governmental authorities under applicable laws. The Scheme also remains conditional upon the merged entity continuing to qualify as a ‘Government Company’ under the Companies Act, 2013. Additionally, the Government of India must continue to retain majority voting rights and management control, either directly or indirectly, in the merged company.
As part of the approved Scheme, a joint valuation exercise has determined the share exchange ratio for the merger. Accordingly, shareholders of REC will receive 88 fully paid-up equity shares of PFC having a face value of ₹10 each for every 100 fully paid-up equity shares of REC with a face value of ₹10 each held by them. The entitlement will be determined based on a record date, which will be announced by the respective Boards of PFC and REC at a later stage after obtaining the requisite approvals.
The merger is expected to create a stronger and more efficient development finance institution dedicated to financing India’s power and infrastructure sectors. By combining the strengths, expertise, and financial resources of both organisations, the merged entity is expected to achieve greater economies of scale, improve resource utilization, strengthen risk management practices, and provide enhanced financial support for conventional as well as renewable energy projects.
Both PFC and REC have played pivotal roles in financing India’s power sector for decades. While PFC has emerged as a leading infrastructure finance company supporting generation, transmission, distribution, and emerging energy sectors, REC has built a strong presence in financing rural electrification, transmission, distribution, renewable energy, and infrastructure development. The proposed integration is expected to leverage the complementary strengths of both institutions while eliminating operational overlaps.
A number of leading professional firms have been engaged to facilitate the merger process. Deloitte Touche Tohmatsu India LLP has been appointed as the Transaction and Tax Advisor for both PFC and REC, while Cyril Amarchand Mangaldas is serving as the Legal Advisor to both companies.
For valuation purposes, RBSA Valuation Advisors LLP was appointed by PFC and Ernst & Young Merchant Banking Services LLP was appointed by REC to prepare joint valuation reports for the proposed merger. To ensure fairness and transparency, SBI Capital Markets Limited was engaged by PFC, while Nuvama Wealth Management Limited was appointed by REC to provide independent fairness opinions on the joint valuation reports.
The proposed merger represents a significant step in strengthening India’s public sector financial architecture. By creating a unified financing institution with an expansive loan portfolio and enhanced financial capabilities, the combined entity is expected to play a more strategic role in supporting the country’s infrastructure expansion, energy transition, and long-term economic growth.
The merger proposal will now move through the statutory approval process before its final implementation. Upon completion of all regulatory, shareholder, creditor, and governmental approvals, the combined entity is expected to emerge as one of India’s largest government-owned financing institutions, well-positioned to support the nation’s ambitious infrastructure and energy development agenda.
Indian Bureaucracy News wishes the very best.