PFC-REC merger explained: Swap ratio, rationale, other key details as merger set to create Rs 11 lakh cr power financing giant

After presenting the Union Budget in February this year, Finance Minister Nirmala Sitharaman said that the government will restructure PFC and REC in order to streamline operations. After receiving the respective boards’ nod, the merger scheme now needs approvals from shareholders, stock exchanges, market regulator Sebi, the National Company Law Tribunal (NCLT) and other statutory authorities before becoming effective.

The share swap ratio has been fixed at 88 PFC shares for every 100 REC shares held. This means that an REC shareholder who owns 100 shares of the company as of the record date will get 100 shares of PFC once the merger takes effect. Her total holding of 100 shares in REC, meanwhile, will be cancelled.

“The share exchange ratio for the proposed merger of REC into PFC shall be 88 equity shares of PFC of Rs 10 each fully paid up for every 100 equity shares of REC of Rs 10 each,” the companies said in an exchange filing.

Also read: PFC-REC merger approved! Here’s what will happen to your existing shares after mega merger

The record date to determine the eligibility of shareholders for the mega merger is yet to be ascertained. Only those REC shareholders who own shares of the company as of the record date will be eligible to receive PFC shares as per the share swap ratio after the merger takes effect.

What is the rationale behind PFC-REC merger?

In its exchange filing, PFC listed several benefits that REC’s merger into the company will bring. The merged entity will emerge as the government’s principal institution for implementing power sector reforms and flagship programmes, serving as the primary vehicle for translating national policy objectives into measurable sectoral outcomes, it said, adding that this would maximise the effectiveness, reach and impact of government initiatives.

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“As India moves towards the ambitious goal of Viksit Bharat 2047, the power sector will require substantial capital investment. On a consolidated basis, the merged entity is expected to benefit from improved balance sheet strength, stronger capital base, and higher operational efficiencies, enabling large-scale funding and improved credit flow across the power sector value chain,” PFC added. It further said that the merged entity would serve as a key financier
of India’s energy transition and strategic infrastructure buildout.

The mega merger is also expected to strengthen the balance sheet, improve borrowing capacity and financial flexibility, and the resulting company would become the primary vehicle for implementing a majority of government schemes for the power sector.

The Cabinet Committee on Economic Affairs earlier cleared a proposal under which PFC acquired 52.63% of the government’s holding in REC. With this acquisition, PFC and REC are currently operating in a holding subsidiary structure. The proposed merger would consolidate the two entities into a single balance sheet, subject to statutory approvals and detailed structuring.Around 37 mutual funds held over 9% stake in the company, as per data on the company’s shareholding pattern as on March 31, 2026. 26 insurance companies held nearly 6% stake, while Life Insurance Corporation of India (LIC) owned around 3% stake.

Nearly 11.69 lakh retail shareholders owned more than 10% stake in REC, as at the end of the January-March quarter.

Also read: PFC, REC boards approve merger scheme, share exchange ratio at 88 PFC shares for every 100 REC shares

PFC had a consolidated net worth of Rs 1.73 lakh crore for the financial year 2026. Its turnover meanwhile stood at Rs 1.15 lakh crore.

REC’s net worth and turnover during the same financial year stood at Rs 85,054 crore and Rs 59,584 crore respectively.

PFC shares dropped over 2% to trade at Rs 422.20 apiece on NSE on Monday morning. The company has a market capitalisation of nearly Rs 1.41 lakh crore.

REC shares meanwhile rose around 1% to trade at Rs 367.95 apiece. The company has a market capitalisation of Rs 96,244 crore.

Also read: Kotak Mahindra Bank shares fall 3% after CEO’s surprise exit. What Nomura, Jefferies said

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