The boards of Power Finance Corporation (PFC) and REC Ltd have approved a proposal to merge the two state-owned power sector financiers through a share-swap arrangement, marking a major step towards creating a larger lending institution for India’s energy sector.
Under the approved scheme, REC shareholders will receive 88 shares of PFC for every 100 shares they hold. The merger is subject to approvals from shareholders, creditors, regulators and other statutory authorities before it can be implemented.
The proposed combination aims to create a stronger financial institution with a larger balance sheet, improved lending capacity and greater operational efficiency. Both companies play a key role in financing power generation, transmission, distribution and renewable energy projects across the country.
The government, which holds a majority stake in both companies, has been exploring ways to improve efficiency among public sector enterprises. The merger is expected to reduce overlapping operations, optimise resources and strengthen support for India’s growing infrastructure and clean energy requirements.
Despite the strategic rationale, investors reacted cautiously to the announcement. Shares of both PFC and REC declined by up to 2 per cent during Monday’s trading session as the market assessed the implications of the merger, including the share-swap ratio and the timeline for regulatory approvals.
The combined entity is expected to play a bigger role in financing India’s energy transition, including renewable energy, transmission networks and distribution reforms. It could also strengthen the country’s ability to mobilise capital for ambitious infrastructure expansion plans.
Company officials said customers, borrowers and lenders are expected to benefit from the combined strengths of both organisations once the transaction is completed.
The merger proposal now moves to the next stage of regulatory and shareholder approvals. If completed as planned, it will create one of India’s largest specialised infrastructure financing institutions, reinforcing the government’s focus on strengthening financing support for the power sector and broader economic growth.
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