PFC buys 52.63% of govt's holding in REC, board approves in-principle merger

PFC buys 52.63% of govt's holding in REC, board approves in-principle merger

• PFC board approves merger with REC Ltd after acquiring majority stake
• Budget 2026: Merger to enhance scale and efficiency in public sector NBFCs
• PFC to remain a government company post-merger under Companies Act 2013

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Power Finance Corporation said on February 6 its board had approved an in-principle merger with Rural Electrification Corporation Ltd.

PFC said it acquired 52.63% of government's holding in REC.

"Pursuant to 'In Principle' approval of Cabinet Committee on Economic Affairs (CCEA), PFC acquired 52.63% of Govt's holding in REC Limited (REC). Accordingly, PFC and REC are operating as holding and subsidiary companies," said PFC in a stock exchange filing.

In Budget 2026, Finance Minister Nirmala Sitharaman announced: "The vision for NBFCs for Viksit Bharat has been outlined with clear targets for credit disbursement and technology adoption. In order to achieve scale and improve efficiency in the Public Sector NBFCs, as a first step, it is proposed to restructure the Power Finance Corporation and Rural Electrification Corporation." Shares of Power Finance Corp have risen 5.8% since then, while those of REC have climbed 2.3%.

"The Board of Directors of PFC took note of the budget announcement and accorded its in-principle approval for restructuring in the form of a merger of PFC and REC, while ensuring that, post-merger, PFC continues to remain as a "Government Company" under the Companies Act, 2013 and other applicable laws. The detailed merger scheme once finalised shall be shared after requisite approvals," added PFC on February 6.

Power Finance Corporation Ltd. is a public company under the Ministry of Power and is a leading Non-Banking Financial Corporation in the country.

REC has evolved and expanded its financing mandate to cover the entire Power-Infrastructure sector comprising Generation, Transmission, Distribution, Renewable Energy and new technologies like Electric Vehicles, Battery Storage, Green Hydrogen etc. More recently REC has also diversified into the Non-Power Infrastructure sector comprising Roads & Highways, Metro Rail, Airports, Ports, IT Communication, etc.

Industry participants have consistently highlighted that sustained reform momentum in the power infrastructure segment is essential for attracting investment across generation, transmission and clean energy projects. The Budget’s focus on restructuring of REC and PFC shows continuity in the Centre’s reform-linked approach to the power sector.

India’s ambition to rapidly electrify its economy will require $450 billion over the next seven years to build new power plants, transmission lines, and energy storage systems, according to Power Secretary Pankaj Agarwal. The nation’s per-capita electricity consumption, currently at a third of the global average, is expected to triple by 2047, he said, aligning with the government’s goal to reach developed nation status by that time.

“Combining the two lenders will give them a size and scale that will help them borrow at lower costs and meet the growing funding needs of the power sector,” Deven Choksey, managing director at DRChoksey FinServ told Bloomberg, which was the first to report that the government was considering the merger of the two power lenders.