REC board approves merger with PFC at 88:100 share swap ratio

The Board of Directors of REC Limited and Power Finance Corporation Limited approved a scheme of merger to create a larger financing entity in the power sector. The merger, approved on June 28, 2026, will result in the absorption of REC into PFC, creating an entity with an aggregate loan book of over INR 11 lakh crore. The scheme is subject to approvals from shareholders, creditors, and regulatory authorities, and requires the merged entity to retain its status as a Government Company with the Government of India holding majority voting rights.

The board approved a share exchange ratio of 88 equity shares of PFC of INR 10 each fully paid up for every 100 equity shares of REC of INR 10 each fully paid up. There is no cash consideration involved in the transaction. The ratio was determined based on a joint valuation report dated June 28, 2026, issued by independent valuers M/s. Ernst & Young Merchant Banking Services LLP and M/s. RBSA Valuation Advisors LLP, supported by fairness opinions from SBI Capital Markets Limited and Nuvama Wealth Management Limited.

Advisors

Deloitte Touche Tohmatsu India LLP is acting as the Transaction and Tax Advisor, and Cyril Amarchand Mangaldas is the Legal Advisor to both PFC and REC. RBSA Valuation Advisors LLP was appointed by PFC and Ernst & Young Merchant Banking Services LLP was appointed by REC to provide joint valuation reports. SBI Capital Markets was appointed by PFC and Nuvama Wealth Management was appointed by REC to provide fairness opinions on the joint valuation reports.

The merger brings together two major public sector undertakings under the Ministry of Power. The following table outlines the financial standing of both entities for FY 2025-26:

Particulars Net worth for FY 2025-26 (₹ crore) Turnover for FY 2025-26 (₹ crore) REC Limited Standalone 84,290 59,140 Consolidated 85,054 59,584 Power Finance Corporation Limited Standalone 1,02,532 58,504 Consolidated 1,73,441 1,15,444

The merger aims to establish the combined entity as the government's principal institution for implementing power sector reforms and flagship programmes. The companies stated that on a consolidated basis, the merged entity is expected to benefit from improved balance sheet strength, a stronger capital base, and higher operational efficiencies. This will enable large-scale funding and improved credit flow across the power sector value chain, including generation, transmission, distribution, and renewable energy.

REC and PFC are both public sector companies, with PFC holding 52.63% of the share capital of REC on a fully diluted basis. The companies noted that provisions of Regulation 23 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, regarding related party transactions are not applicable to transactions between public sector companies. Consequently, no specific approval under Regulation 23 is required for the proposed scheme.

Separately, the board also approved a proposal to raise funds through the private placement of unsecured or secured non-convertible bonds or debentures of up to ₹1,40,000 crore. This fundraising is subject to the approval of shareholders in the ensuing Annual General Meeting and will be executed in one or more tranches over a period of one year from the date of the shareholder resolution.

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