Government Explores Ways to Keep 51% Stake in PFC After REC Merger

The Government of India is actively evaluating structural options to retain majority control in the proposed merger of Power Finance Corporation (PFC) and Rural Electrification Corporation (REC), as per PTI reports. 

The move is part of a broader consolidation strategy aimed at creating a large-scale, efficient public sector NBFC to support India’s power financing ecosystem. 

Stake Preservation Becomes Central to Merger Structure 

As per reports it is indicated that maintaining a minimum 51% ownership in the merged entity is a key objective. This threshold is essential for the entity to continue qualifying as a government company under the Companies Act. 

To achieve this, the government is exploring multiple capital structuring options. These include issuing preference shares to the government as well as raising fresh equity capital where the government participates as a primary investor.  

Both approaches are designed to strengthen promoter holding without disrupting the merger framework. 

Merger To Create a Power Financing Giant 

The restructuring of PFC and REC, announced in the FY27 Union Budget, is expected to significantly enhance scale and efficiency.  

The combined entity will emerge as the largest government-owned NBFC, with a stronger balance sheet and improved capacity to fund large infrastructure projects. 

The merger is also expected to improve risk absorption capabilities and provide greater flexibility in financing diverse segments within the power sector. 

Stronger Balance Sheet and Diversified Lending Opportunity 

At present, the government holds 55.99% in PFC and 52.63% in REC. Preserving majority control post-merger is critical not only from a regulatory standpoint but also for maintaining strategic influence in the sector. 

The merged entity is expected to benefit from a broader lending portfolio, including renewable energy, transmission, and emerging technologies, enabling it to compete more effectively with private sector financiers. 

As of December 31, 2025, PFC had a consolidated loan book of ₹11.51 lakh crore, while REC’s loan portfolio stood at ₹5.82 lakh crore, highlighting the scale of the combined institution. 

Read More: PFC and REC Merger: PFC Appoints Consultants to Streamline Process! 

Conclusion 

The government’s focus on retaining control while pursuing consolidation reflects a balanced approach to scale and governance, positioning the merged PFC-REC entity as a key pillar in India’s power financing landscape.

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