New Delhi: As India moves toward the final merger of Power Finance Corporation (PFC) and REC Limited in 2026, attention has returned to the landmark transaction that set the stage for this consolidation — a ₹14,500-crore acquisition completed in 2019.
In a strategic decision approved by the Cabinet Committee on Economic Affairs (CCEA), PFC acquired the Government of India’s entire 52.63 percent equity stake in REC Limited, marking one of the most significant restructuring moves in India’s power financing history.
Creation of a Power-Lending Giant
The acquisition, finalized in March 2019, converted REC into a subsidiary of PFC, making PFC the promoter and holding company. While both entities continued to function as separate legal companies, the deal effectively placed India’s two largest power-sector non-banking financial companies (NBFCs) under a single strategic command.
Under the transaction, PFC purchased 103.94 crore equity shares of REC at approximately ₹139.50 per share, transferring management control from the central government directly to PFC. Both companies remained under the administrative oversight of the Ministry of Power.
At the time, the combined annual revenue of the two Navratna public sector enterprises was estimated at nearly ₹50,000 crore, instantly creating one of the largest power-focused financial institutions in the country.
Why the Government Chose to Divest
The government’s decision to sell its stake in REC was driven by a broader strategy to strengthen India’s power financing ecosystem through consolidation.
Officials highlighted several key objectives behind the move:
- Lower borrowing costs through a larger and stronger combined balance sheet, particularly in global debt markets
- Operational synergies by eliminating competition between two government-owned lenders financing the same power projects
- Improved resolution of stressed assets, enabling a coordinated approach to tackling bad loans in the power sector
The consolidation was also seen as a step toward more efficient capital allocation across power generation, transmission, and distribution projects.
From Subsidiary Structure to Full Merger
Following the acquisition, PFC and REC operated in a holding-subsidiary model for several years. That structure is now set to change.
In the Union Budget 2026–27, the government announced plans to merge REC into PFC, completing the final phase of consolidation. Once executed, the merger will create a single, unified financial powerhouse with enhanced lending capacity and a stronger institutional framework to support India’s energy transition and infrastructure expansion.
Industry analysts view the merger as a logical culmination of the 2019 acquisition — a move expected to further streamline operations, improve capital efficiency, and reinforce India’s long-term power financing strategy.