The Indian government is exploring different strategies, including issuing preference shares or new equity, to maintain a 51% stake in Power Finance Corporation after its merger with Rural Electrification Corporation. This move aims to ensure PFC-REC remains a government-owned entity, enhancing its capabilities and portfolio diversification.

Government's Strategic Move to Retain Majority Stake in PFC-REC Merger

The Indian government is considering various options, such as issuing preference shares or fresh equity, to retain a majority 51% stake in the Power Finance Corporation after it merges with the Rural Electrification Corporation. The Finance Minister disclosed plans in the FY27 Budget to restructure these entities for greater efficiency.

A senior official stated that ensuring a majority stake in the merged entity is crucial since it will be the largest government-owned NBFC, pivotal for scaling operations and improving efficiency. Options being discussed involve issuing preference shares or new equity to keep the merged entity under government control.

The current government stake stands at 55.99% in PFC and 52.63% in REC. Maintaining this above 51% is essential for keeping the company within the category of 'government company' as per the Companies Act. The merged NBFC will likely enhance its capability to back substantial projects and diversify its portfolio, particularly in renewables and transmission.

(With inputs from agencies.)