Power Finance Corporation (PFC) has advanced in its plans to merge with REC Limited, having received board approval to seek formal assent from the President of India. This transaction aims to consolidate both entities under a unified structure while retaining its "government company" status.
The PFC board has decided to formally seek approval from the President of India for merging REC into PFC. Parminder Chopra, PFC’s Chairman and Managing Director, has been delegated to apply for the necessary governmental permissions for the merger.
The merger will involve a share exchange ratio, determined by appointed valuers. Efforts will ensure the merged entity continues to possess its "government company" status, potentially involving capital infusion by the central government.
The merger proposal is subject to final board approval and multiple regulatory clearances. On completion, all assets and liabilities of REC will be transferred to PFC, with REC dissolving as per legal provisions.
As of now, the Indian government holds 55.9% in PFC and 52.6% in REC. Analysts suggest that, without additional capital, governmental stake could dip below the essential 51% ownership threshold for the merged entity.
Government majority ownership is imperative as the bonds issued by both PFC and REC are tied to government stake covenants.
A reduction below 51% may prompt covenant breaches, raising concerns regarding control transitions.
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An estimated ₹25,000 crore in government infusion may be needed to sustain the majority stake, posing a challenge amidst fiscal constraints. Analysts have pointed out the requirement for adequate capital management to uphold the merger’s strategic objectives.
The merger aligns with the government's strategy to streamline state-supported financial institutions in power and infrastructure finance, as highlighted in the Union Budget on February 1.
As of May 15, 2026, at 3:30 PM, Power Finance Corporation share price on NSE was closed at ₹445.75 down by 1.26% from the previous closing price.
As of May 15, 2026, at 3:30 PM, REC share price on NSE was closed at ₹345.85 down by 0.70% from the previous closing price.
The PFC board's approval to pursue REC’s merger marks a significant milestone in forming one of India's largest infrastructure finance bodies. With government ownership and regulatory parameters addressed, the merger’s successful implementation remains a key focus.
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Published on: May 18, 2026, 8:10 AM IST
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