In a landmark move for India’s power and infrastructure financing sector, the boards of state-owned Power Finance Corporation (PFC) and REC Limited have approved a merger scheme that will create a financing behemoth with a combined loan book exceeding ₹11 lakh crore. The proposed merger is expected to significantly strengthen the country’s ability to finance large-scale power, renewable energy, transmission, and infrastructure projects.
Under the approved scheme, REC will be amalgamated with PFC and PFC will be the surviving entity. The merger will be carried out under Sections 230 to 232 and other applicable provisions of the Companies Act, 2013, subject to obtaining various statutory and regulatory approvals. These include approvals of shareholders, creditors, regulatory authorities and Government of India.
A key condition attached to the merger is that the combined entity must continue to qualify as a Government Company under the Companies Act, with the Government of India retaining majority ownership, voting rights, and control, either directly or indirectly.
As part of the merger arrangement, REC shareholders will receive 88 fully paid equity shares of PFC for every 100 fully paid equity shares of REC held by them. The record date for the share exchange will be announced later by the boards of both companies. The exchange ratio has been determined based on joint valuation reports prepared by appointed valuation experts.
The merger is widely viewed as a strategic consolidation aimed at creating India’s largest dedicated power sector financier. The combined entity is expected to benefit from improved scale, stronger capital efficiency, streamlined operations, and enhanced lending capabilities at a time when India is rapidly expanding investments in renewable energy, transmission infrastructure, battery energy storage systems, green hydrogen, and grid modernization.
Industry observers believe the combined entity will be better placed to help meet India’s ambitious clean energy targets including the country’s 500 GW non-fossil fuel capacity target by 2030. The merger is also expected to enhance operational synergies and facilitate quicker financing decisions for large infrastructure projects.
Deloitte Touche Tohmatsu India LLP has been appointed as the transaction and tax advisor and Cyril Amarchand Mangaldas will be the legal advisor to smoothen the transaction. RBSA Valuation Advisors LLP and Ernst & Young Merchant Banking Services LLP were the valuers and SBI Capital Markets and Nuvama Wealth Management were the fairness opinion providers for PFC and REC respectively.
Once completed, the merger will mark one of the most significant consolidations in India’s financial and energy sectors, creating a stronger institution capable of supporting the country’s accelerating energy transition and infrastructure expansion plans.
Electrify your feed! Click here to join our Whatsapp group and to get the latest updates, expert insights, and innovations driving India’s energy storage revolution.
