State-owned power sector financiers Power Finance Corporation (PFC) and REC Limited have approved a merger scheme that is expected to create one of India’s largest government-owned infrastructure financing institutions with a combined loan book exceeding ₹11 lakh crores.
The merger that has been approved by the boards of both companies proposes the amalgamation of REC into PFC under the provisions of the Companies Act. Once completed, the combined entity is expected to play a larger role in financing power generation, transmission, distribution, renewable energy and other infrastructure projects across the country.
Under the approved scheme, REC shareholders will receive 88 equity shares of PFC for every 100 equity shares held in REC, based on the share exchange ratio approved by the boards. The record date for determining shareholder eligibility will be announced at a later stage. The proposed merger remains subject to approvals from shareholders, creditors and various statutory and regulatory authorities before it becomes effective. The Government of India will continue to retain majority ownership and control of the merged entity, allowing it to remain a government company.
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How the Combined Entity Could Reshape Power Financing
The combination is expected to strengthen India’s power financing ecosystem by bringing together the lending capabilities of two of the country’s largest specialized infrastructure financiers. A larger balance sheet could improve funding capacity for conventional power projects, renewable energy, transmission networks and distribution infrastructure, while also streamlining operations under a single institution.
The merger also aligns with the government’s broader objective of creating stronger public sector financial institutions capable of supporting India’s expanding infrastructure and clean energy investment requirements.
With board approvals now in place, the transaction enters the regulatory approval phase. Market participants will closely monitor the remaining clearances and implementation timeline, as the merger is expected to reshape the landscape of power sector financing in India.
