PFC and REC boards approve mega-merger to create India’s largest power sector NBFC

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The boards of state-owned Power Finance Corporation and REC Ltd have formally approved a definitive merger scheme to absorb REC into PFC. This establish India’s largest non-banking financial company dedicated to the power and infrastructure sectors, commanding a massive consolidated loan book exceeding ₹11 lakh crore.

The transaction will be executed entirely through an equity-swap mechanism with no cash components involved. Under the finalized terms, eligible REC investors will receive 88 fully paid-up equity shares of PFC (face value of ₹10 each) for every 100 equity shares of REC they hold as of a future record date. Currently, PFC already maintains a majority 52.63% stake in REC on a fully diluted basis, while the Central Government directly holds a 55.99% stake in PFC.

This unified mega-lender is strategically positioned to serve as the primary financial engine for India’s clean energy transition and large-scale infrastructure expansion over the coming decade. Backed by massive combined financial weight with PFC reporting a consolidated net worth of ₹1,73,441 crore and turnover of ₹1,15,444 crore for FY26 alongside REC’s standalone net worth of ₹84,290 crore the merged entity will aggressively fund power generation, distribution networks, transmission grids, green hydrogen initiatives, battery storage, and small modular nuclear reactors.

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The integration stems directly from the public sector financial restructuring initiatives outlined by the Central Government in the Union Budget 2026 under the Viksit Bharat framework, designed to eliminate operational overlaps, achieve economies of scale, and significantly lower global borrowing costs. The board meetings were convened shortly after receiving formal clearance from the President of India, which was officially communicated to the institutions by the Ministry of Power.

Moving forward, the absorption is scheduled to take effect retroactively from an appointed date of April 1, but remains subject to a string of mandatory regulatory clearances. The final execution will be subject to the approval of shareholders, creditors, BSE, NSE, SEBI and the National Company Law Tribunal, with the strict caveat that the entity must maintain its status as a government-controlled company on a continuous basis. The entities have brought in a powerhouse advisory panel to guide the complex corporate transition: Deloitte Touche Tohmatsu India is the transaction advisor and tax advisor, Cyril Amarchand Mangaldas is the legal advisor, RBSA Valuation Advisors and EY are the joint valuers and SBI Capital Markets and Nuvama Wealth Management are the independent fairness opinion providers.

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