PFC and REC Announce Major Merger to Enhance Power Financing Capacity

Power Finance Corporation and REC Ltd have announced their boards' approval for a merger scheme. The merger aims to create a larger entity with over Rs 11 lakh crore in loan assets, enhancing infrastructure funding capabilities, pending necessary regulatory and shareholder approvals.

In a strategic move to bolster financing for India's power and infrastructure sectors, the boards of Power Finance Corporation (PFC) and REC Ltd have approved a merger scheme, pending regulatory permissions. This development was detailed in exchange filings by both state-owned entities on Saturday.

The merger, realized through sections 230 to 232 of the Companies Act, 2013, will see REC Ltd absorbed into PFC, concluding with the dissolution of REC without being wound up. Eligible shareholders will receive 88 PFC equity shares for every 100 REC shares held.

Once in effect, this merger envisions creating a finance powerhouse with a loan book exceeding Rs 11 lakh crore. The combined entity aims to enhance power sector reforms and accelerate green energy initiatives, leveraging improved financial and operational capacities.

The merger proposal factors in valuation analysis by Ernst & Young Merchant Banking Services LLP and RBSA Valuation Advisors LLP, with supplementary fairness opinion from Nuvama Wealth Management Ltd. Concurrently, REC's board sanctioned a plan to raise funds up to Rs 1.40 lakh crore through bonds.

Both companies emphasized that the successful merger relies on multiple approvals, including nods from shareholders, creditors, and regulatory authorities. Maintaining its status as a government company, the entity's majority control will remain with the Indian government.