PFC, REC Boards Approve Merger to Create ₹11 Lakh Crore Power Sector Financing Giant
Merger aims to create one of India's largest infrastructure financiers, subject to shareholder, regulatory and government approvals
The proposed merger, approved under Sections 230 to 232 of the Companies Act, 2013, will see REC merged into PFC, creating one of India's largest infrastructure financing institutions dedicated to supporting the country's power and energy sectors.
NEW DELHI: The Boards of Directors of Power Finance Corporation (PFC) and REC Limited on Tuesday approved a merger scheme that will combine the two state-owned non-banking financial companies (NBFCs) into a single entity with an aggregate loan book exceeding ₹11 lakh crore.
The proposed merger, approved under Sections 230 to 232 of the Companies Act, 2013, will see REC merged into PFC, creating one of India’s largest infrastructure financing institutions dedicated to supporting the country’s power and energy sectors.
According to the scheme approved by both boards, REC will function as the transferor company while PFC will become the transferee company. The merger remains subject to approvals from shareholders, creditors, regulatory authorities and the Government of India, besides other statutory clearances.
The companies said the merged entity will continue to qualify as a Government Company, with the Government of India retaining majority ownership and control, either directly or indirectly.
Share exchange ratio announced
Under the approved scheme, shareholders of REC will receive 88 equity shares of PFC for every 100 equity shares of REC held by them. The exchange ratio has been determined based on a joint valuation exercise, while the record date for the share swap will be announced later by the boards of the two companies.
Strengthening power sector financing
Both PFC and REC are among India’s largest public sector financial institutions dedicated to financing the power sector. While PFC has traditionally focused on generation, transmission and distribution projects, REC has built a strong presence in rural electrification, renewable energy, infrastructure and distribution reforms.
Industry experts believe the merger could create a stronger balance sheet, improve operational efficiencies and provide greater financial capacity to support India’s rapidly expanding energy infrastructure, including renewable energy, power transmission, smart grids and distribution modernisation.
The consolidation also aligns with the Government of India’s broader strategy of creating larger and more competitive public sector financial institutions capable of funding the country’s infrastructure ambitions.
Advisory firms
Deloitte Touche Tohmatsu India LLP has been appointed as the transaction and tax advisor, while Cyril Amarchand Mangaldas is serving as the legal advisor for both companies.
RBSA Valuation Advisors LLP and Ernst & Young Merchant Banking Services LLP prepared the joint valuation reports for PFC and REC, respectively. SBI Capital Markets and Nuvama Wealth Management provided fairness opinions on the valuation reports.
Why this matters
The proposed merger marks one of the most significant consolidations in India’s public sector financial landscape in recent years. By combining the strengths of PFC and REC, the government aims to create a stronger financing institution capable of supporting India’s growing investments in electricity generation, transmission, renewable energy and power distribution.
With India targeting 500 GW of non-fossil fuel electricity capacity by 2030, financing requirements for the power sector are expected to increase substantially. A larger, well-capitalised lending institution could play a critical role in mobilising long-term capital for clean energy projects, grid modernisation and energy transition initiatives while improving operational efficiency through the integration of two complementary public sector lenders.
