The board of REC Limited on Sunday approved a scheme of merger by absorption with Power Finance Corporation Limited (PFC), under which REC will dissolve into PFC and REC shareholders will receive 88 equity shares of PFC for every 100 equity shares of REC, according to a regulatory filing.
Merger structure and rationale
The scheme provides for the merger of REC into PFC on a going concern basis from the appointed date, with REC being dissolved without being wound up and PFC issuing consideration shares to eligible REC shareholders as on the record date, the filing said.
There is no cash consideration involved in the deal.
The filing stated that the merged entity would become the government’s principal institution for implementing power sector reforms and flagship programmes, and would serve as a key financier of India’s energy transition, supporting generation, transmission, distribution, renewable energy and emerging technologies such as green hydrogen, energy storage and small modular nuclear reactors.
The merger is expected to strengthen the combined balance sheet, improve borrowing capacity and financial flexibility, and enable greater credit flow across the power sector, the company said.
Valuation and related party clearance
The share exchange ratio was determined based on a joint valuation report dated June 28, 2026, issued by Ernst & Young Merchant Banking Services LLP and RBSA Valuation Advisors LLP, supported by a fairness opinion from Nuvama Wealth Management Limited, the filing said.
PFC holds 52.63% of REC’s share capital on a fully diluted basis. The filing noted that since both companies are public sector entities, the transaction is exempt from related party transaction approval requirements under Regulation 23 of the Listing Regulations, and does not attract Section 188 of the Companies Act, 2013, citing a 2014 Ministry of Corporate Affairs circular.
Financials and fund-raising plan
REC reported a standalone net worth of ₹84,290 crore and turnover of ₹59,140 crore for FY 2025-26, while PFC reported a standalone net worth of ₹1,02,532 crore and turnover of ₹58,504 crore for the same period, according to the filing.
Separately, the REC board also approved a proposal to raise funds of up to ₹1,40,000 crore through private placement of unsecured or secured non-convertible bonds or debentures, subject to shareholder approval at the company’s upcoming annual general meeting.
The funds will be raised in one or more tranches over a period of one year from the date of shareholder approval.
The scheme will require regulatory approvals, including no-objection letters from NSE and BSE, before the merged entity comes into effect.
