Synopsis: Power Finance Corporation Limited’s board has approved a scheme of merger by absorption of REC Limited into PFC, creating India’s largest government-owned financing institution with a combined loan book exceeding ₹11 lakh crore. REC shareholders will receive 88 PFC shares for every 100 REC shares held, in a transaction structured entirely as a share swap with no cash consideration.
India’s power financing sector is undergoing a structural consolidation as the government seeks to channel capital more efficiently toward its Viksit Bharat 2047 infrastructure ambitions. With the country requiring trillions in power sector investment over the next two decades spanning generation, transmission, distribution, renewable energy, and grid modernisation policymakers have determined that a single, scaled financing institution can deploy capital more effectively than two overlapping entities operating in parallel.
What’s the News?
On June 28, 2026, the Board of Power Finance Corporation (PFC) approved a plan to fully merge and absorb REC Limited into PFC, following standard corporate and tax laws. Under this deal, REC will stop operating as a separate company and will be smoothly integrated into PFC as an active, ongoing business. This is a natural next step, as PFC already owns a majority stake of 52.63% in REC.
The share exchange ratio, determined through a joint valuation report by Ernst & Young Merchant Banking Services LLP and RBSA Valuation Advisors LLP and supported by fairness opinions from SBI Capital Markets and Nuvama Wealth Management, has been set at 88 equity shares of PFC (face value ₹10 each, fully paid up) for every 100 equity shares of REC (face value ₹10 each, fully paid up). REC’s equity shares will be cancelled upon the scheme becoming effective. The scheme requires regulatory approvals from BSE, NSE, shareholders and creditors of both companies, and other applicable authorities.
The merged entity will carry an aggregate loan book exceeding ₹11 lakh crore, establishing it as the government’s principal financing institution for implementing power sector reforms and flagship programmes.
Shares of Power Finance Corporation Limited, with a market capitalisation of ₹1,40,204.82 crore, are trading at ₹425.05, down 1.76% from its previous closing price. The stock touched an intraday high of ₹432.45 and a low of ₹423.65. It is currently trading at a P/E ratio of 4.25.
On a standalone basis, PFC reported a net worth of ₹1,02,532 crore and turnover of ₹58,504 crore for FY2025-26. On a consolidated basis, net worth stood at ₹1,73,441 crore with turnover of ₹1,15,444 crore. REC, as the transferor entity, reported a standalone net worth of ₹84,290 crore and turnover of ₹59,140 crore, with consolidated figures of ₹85,054 crore and ₹59,584 crore respectively for the same period. The merger will combine these balance sheets, strengthening borrowing capacity, improving credit metrics, and enabling more competitive pricing for power sector borrowers. With no cash outflow involved, PFC’s liquidity position remains intact through the transition.
This merger combines India’s two biggest government-owned power finance companies into a single powerhouse that can fund massive energy projects neither could handle alone. By joining forces, they eliminate unnecessary competition and overlap, since both companies were already working toward the same government goals.
This unified mega-company will now have the massive financial strength needed to fund advanced green technologies like green hydrogen, energy storage, small nuclear reactors, and modern power grids where a single, coordinated lender is far more effective than two separate ones.
Company Overview
Incorporated in 1986, Power Finance Corporation Limited is India’s largest government-owned non-banking financial company and a Schedule-A Maharatna CPSE under the Ministry of Power. PFC finances power generation, transmission, distribution, and renewable energy projects, and also serves as nodal agency for key government programmes including the Revamped Distribution Sector Scheme and the Integrated Power Development Scheme.
REC Limited, similarly a Maharatna CPSE under the Ministry of Power, operates as a leading infrastructure financing NBFC across the power sector value chain and also serves as implementation agency for the PM Surya Ghar Muft Bijli Yojana.
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