In a major development for India’s power sector financing ecosystem, the Boards of REC Limited and Power Finance Corporation Limited (PFC) have approved a scheme to merge REC with PFC. The proposed merger is expected to create one of the country’s largest infrastructure financing institutions, with a combined loan book exceeding ₹11 lakh crore.
The merger has been approved under Sections 230 to 232 and other applicable provisions of the Companies Act, 2013, and is aimed at strengthening the financial capabilities of the two state-owned lenders.
Merger to Create a Larger Power Sector Financier
Under the approved scheme, REC Limited will merge into Power Finance Corporation Limited, with PFC becoming the surviving entity.
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The combined organisation is expected to have a significantly larger lending portfolio, enabling it to support India’s growing investment requirements in power generation, transmission, distribution, renewable energy and other infrastructure sectors.
Officials believe the merger will improve operational efficiency, enhance financial strength and create greater synergies between the two public sector companies.
Multiple Regulatory Approvals Required
The proposed merger is subject to several statutory and regulatory approvals before it can become effective.
These include approvals from:
- Shareholders of REC and PFC
- Creditors of both companies
- Relevant regulatory authorities
- Government authorities, wherever applicable
The scheme also requires the merged entity to continue qualifying as a Government Company under the Companies Act, 2013. In addition, the Government of India must continue to retain majority voting rights and control, either directly or indirectly, in the merged organisation.
Share Exchange Ratio Finalised
As part of the merger proposal, the boards have approved the share exchange ratio based on an independent valuation.
Under the scheme, shareholders of REC will receive 88 equity shares of PFC (face value ₹10 each) for every 100 fully paid-up equity shares of REC (face value ₹10 each).
The exchange will be applicable to shareholders whose names appear on the record date, which will be announced by the boards of the two companies at a later stage.
Strengthening India’s Infrastructure Financing
Both REC and PFC have played a vital role in financing India’s power sector for several decades. While PFC primarily finances power generation, transmission and distribution projects, REC has been a key lender for rural electrification, infrastructure and renewable energy initiatives.
The proposed merger is expected to create a stronger institution with enhanced lending capacity, better capital efficiency and a broader ability to support India’s expanding infrastructure and clean energy ambitions.
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Once all regulatory approvals are secured, the combined entity is expected to play an even larger role in financing projects aligned with the country’s long-term economic growth and energy transition goals.
Key Highlights
- The Boards of REC Limited and Power Finance Corporation have approved a merger scheme.
- The proposed merger will create a financing institution with a combined loan book of over ₹11 lakh crore.
- REC will merge into PFC, subject to shareholder, creditor and regulatory approvals.
- The Government of India will continue to retain majority ownership and control in the merged entity.
- REC shareholders will receive 88 PFC equity shares for every 100 REC equity shares, based on the approved exchange ratio.
- The merger aims to strengthen financing for India’s power, infrastructure and renewable energy sectors.
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