PFC, REC boards approve merger to create ₹11 lakh crore power financing giant

Shares of PFC and REC Ltd will be in the spotlight on Monday, June 29, as the boards of state-owned Power Finance Corporation (PFC) and REC Ltd have approved a scheme of merger under which REC will be amalgamated with PFC, creating a power sector financing entity with a combined loan book of more than ₹11 lakh crore.

In the press release released on Sunday, June 28, late in the night, PFC said, "The Board of Directors of Power Finance Corporation Limited (PFC) and REC Limited (REC) today approved the Scheme of Merger (Scheme) for merger of REC (Transferor Company) into PFC (Transferee Company) and their respective shareholders and creditors, under Sections 230 to 232 and other applicable provisions of the Companies Act, 2013."

The merger of REC into PFC shall create a financing entity with an aggregate loan book of over ₹11 lakh crore.

As part of the approved scheme, REC shareholders will receive 88 equity shares of PFC for every 100 equity shares held in REC. The share exchange ratio has been determined based on a joint valuation exercise, with the record date to be announced later by the boards of the two companies.

The companies said the merger is also contingent upon the merged entity continuing to qualify as a government company under the Companies Act, 2013, with the Government of India retaining majority voting rights and control, directly or indirectly.

Advisors

PFC said that Deloitte Touche Tohmatsu India LLP is acting as Transaction and Tax Advisor and Cyril Amarchand Mangaldas as the Legal Advisor, to both PFC and REC.

Further, RBSA Valuation Advisors LLP was appointed by PFC, and Ernst & Young Merchant Banking Services LLP was appointed by REC, to provide joint valuation reports.

SBI Capital Markets was appointed by PFC, and Nuvama Wealth Management was appointed by REC, to provide their respective fairness opinions on the joint valuation reports.

Fund-raising by REC

State-owned REC Ltd has approved a proposal to raise up to ₹1.4 lakh crore through the private placement of unsecured or secured non-convertible bonds/debentures, subject to shareholder approval at the company's upcoming Annual General Meeting.

According to the company's stock exchange filing, the fundraising will be carried out in one or more tranches over a period of one year from the date shareholders approve the resolution. The issuances will also be subject to approval from the competent authority.

The proposed fundraising is aimed at meeting REC's financing requirements and supporting its lending operations.

PFC-REC merger details

Early in June 2026, the President of India approved the merger of REC Ltd with Power Finance Corporation, nearly seven years after PFC acquired the government's majority stake in REC.

According to a regulatory filing by REC, the Ministry of Power, vide its letter dated June 10, 2026, has conveyed the approval of the Competent Authority (President of India) in respect of the aforesaid proposal (merger of REC into PFC).

On May 16, the Board of Directors at its meeting reserved the proposal for the merger of REC into PFC in view of the approval of the proposal by the President of India.

Finance Minister Nirmala Sitharaman, in her Budget speech this year, had talked about the merger of REC and PFC.

In order to achieve scale and improve efficiency in the public sector NBFCs, she had said, as a first step, it is proposed to restructure the Power Finance Corporation and REC (erstwhile Rural Electrification Corporation).