Mumbai, India: In a major development for India’s power and infrastructure financing sector, the Boards of Directors of Power Finance Corporation (PFC) and REC Limited have officially approved a Scheme of Merger, paving the way for the creation of the country’s largest government-owned power financing institution. Once completed, the merged entity will manage a combined loan portfolio exceeding ₹11 lakh crore (approximately $128 billion), significantly strengthening India’s capacity to finance critical energy and infrastructure projects.
The merger has been approved under Sections 230 to 232 of the Companies Act, 2013, and represents one of the most significant consolidation initiatives in India’s public sector financial industry. However, the transaction remains subject to multiple regulatory, shareholder, creditor, and government approvals before it becomes legally effective.
REC to Merge into PFC
Under the proposed restructuring:
- REC Limited will merge into Power Finance Corporation (PFC).
- REC will serve as the Transferor Company.
- PFC will become the Transferee Company.
- The merger will include the shareholders and creditors of both organizations.
Following the completion of all approvals, the combined institution is expected to become the largest specialized lender supporting India’s electricity generation, transmission, renewable energy, and power distribution sectors.
Share Exchange Ratio Announced
One of the most closely watched aspects of the merger is the approved share swap ratio.
According to the merger scheme:
- REC shareholders will receive 88 equity shares of PFC for every 100 equity shares of REC they own.
The record date for determining eligible shareholders has not yet been announced and will be determined by the Boards of both companies at a later stage.
Merger Still Requires Multiple Approvals
Although both Boards have approved the proposal, the merger cannot proceed until it receives clearance from several stakeholders, including:
- Shareholders of both companies
- Creditors
- Regulatory authorities
- Government authorities
- Other statutory bodies as required under Indian law
Additionally, one of the key conditions is that the merged organization must continue to qualify as a Government Company under the Companies Act, 2013, with the Government of India retaining majority ownership, voting rights, and management control.
Strategic Benefits of the Merger
The combination of PFC and REC is expected to generate several long-term strategic advantages, including:
- Greater lending capacity
- A stronger financial position
- Improved operational efficiency
- More effective capital allocation
- Reduced duplication of resources
- Enhanced financing support for India’s expanding energy infrastructure
With a combined loan book exceeding ₹11 lakh crore, the merged institution will play an increasingly important role in supporting India’s transition toward renewable energy, expanding electricity infrastructure, and meeting the country’s growing power demand.
Top Advisors Supporting the Transaction
Several leading financial and legal firms have been appointed to oversee different aspects of the merger.
Transaction and Legal Advisors:
- Deloitte Touche Tohmatsu India LLP – Transaction and Tax Advisor
- Cyril Amarchand Mangaldas – Legal Advisor
Valuation Advisors:
- RBSA Valuation Advisors LLP (appointed by PFC)
- Ernst & Young Merchant Banking Services LLP (appointed by REC)
Fairness Opinion Advisors:
- SBI Capital Markets
- Nuvama Wealth Management
These firms have assisted with valuation, taxation, legal documentation, and fairness assessments throughout the merger process.
What Happens Next?
Before the merger becomes effective, several important milestones remain:
- Regulatory approvals
- Shareholder approval
- Creditor approval
- Tribunal and statutory clearances
- Announcement of the record date
- Allotment of PFC shares to REC shareholders
Until these steps are completed, PFC and REC will continue to operate as separate organizations.
Impact on Investors
For existing REC shareholders, the merger means they will eventually become PFC shareholders based on the approved 88:100 exchange ratio, provided all regulatory conditions are fulfilled.
Investors are expected to closely monitor the approval process, as the merger has the potential to create a financially stronger institution with enhanced long-term growth prospects in India’s rapidly expanding power and infrastructure sectors.
Conclusion
The proposed merger between Power Finance Corporation and REC Limited marks a historic milestone in India’s financial and energy landscape. By combining their financial resources, expertise, and lending capabilities, the merged organization is expected to become a powerhouse in financing the nation’s future electricity, renewable energy, and infrastructure development.
While the proposal has received approval from both companies’ Boards of Directors, the merger will only become effective after obtaining all required regulatory and shareholder approvals. If successfully completed, the transaction is expected to reshape India’s public sector financing ecosystem and strengthen the country’s long-term infrastructure investment capabilities.
