PFC, REC Shares Surge After Budget 2026 Restructuring Plan

Introduction

In a significant move announced during the Union Budget 2026 speech, Finance Minister Nirmala Sitharaman revealed plans to restructure two of the country's largest state-run non-bank lenders, Power Finance Corp. (PFC) and REC Ltd. The proposal, aimed at strengthening public sector financial institutions, immediately sparked a positive reaction in the stock market, with shares of both companies surging by up to 5% during the special trading session on February 1, 2026.

The Budget Announcement

Presenting her ninth consecutive budget, Finance Minister Sitharaman stated that the government would undertake a restructuring of PFC and REC to enhance their operational efficiency and fortify their role in financing India's growing power and infrastructure needs. This initiative is part of the government's broader 'Viksit Bharat' vision, which seeks to create a developed India by 2047. While the specific details of the restructuring are yet to be disclosed, the announcement signals a strategic overhaul of these key public sector undertakings (PSUs).

In addition to the PFC-REC plan, the Finance Minister also proposed the formation of a high-level committee to conduct a comprehensive review of the banking sector. This committee will be tasked with suggesting measures to align the sector with the future growth requirements of the Indian economy.

Immediate Market Reaction

The market responded swiftly and positively to the news. Shares of Power Finance Corporation jumped as much as 5.90% to hit an intraday high of ₹401.75 on the National Stock Exchange. Similarly, REC Ltd.'s shares rallied 4.33% to an intraday high of ₹379.90. By the end of the session, PFC was trading around ₹395.7, up 3.7%, while REC was trading near ₹375, a gain of 3%. This surge provided a much-needed boost to the stocks, which had been underperforming.

Performance in Perspective

The rally on Budget day marked a sharp reversal of fortune for both stocks. Throughout 2025, PFC and REC were notable underperformers, with their share prices declining by 20% to 30%. This poor performance came after a spectacular run in 2023, when both stocks had more than tripled in value, rewarding investors handsomely. The budget announcement appears to have renewed investor confidence in their long-term prospects.

Understanding the Current Structure

Currently, Power Finance Corporation acts as the promoter of REC Ltd., holding a majority stake of 52.63%. This relationship was established in 2019 when PFC acquired the government's stake in REC. Both entities operate under the administrative control of the Ministry of Power and are the primary lenders to India's power sector. Their financing mandate has expanded over the years to include renewable energy, transmission, distribution, and even non-power infrastructure like metro rail and highways.

Rationale Behind the Restructuring

The government's objective behind restructuring these two financial giants is to create a more streamlined and powerful lending institution. Industry experts believe the move could lead to better synergy, reduced borrowing costs, and a more consolidated approach to financing large-scale infrastructure projects. By improving their operational framework, the government aims to ensure that these institutions can provide faster and more reliable financial support to developers and state utilities, thereby accelerating project execution across the country.

This reform aligns with the government's sustained focus on the power and infrastructure sectors, which are critical for economic growth. A stronger, more efficient financing mechanism is essential to attract investment in generation, transmission, and clean energy projects.

Broader Financial Sector Reforms

The restructuring of PFC and REC is part of a larger package of financial sector reforms announced in Budget 2026. The plan to form a high-level committee for the banking sector and outline a clear vision for NBFCs indicates a comprehensive strategy to prepare India's financial architecture for the next phase of growth. These measures are designed to enhance stability, improve credit disbursement, and encourage the adoption of new technologies across the financial landscape.

Conclusion

The proposed restructuring of PFC and REC is a significant policy announcement from Union Budget 2026, reflecting the government's commitment to strengthening public sector financial institutions. The immediate positive reaction from the stock market indicates that investors view this as a constructive step. While the market awaits further details on the exact nature and timeline of the restructuring, the move is expected to enhance the lending capacity and operational efficiency of these crucial power sector financiers, positioning them to better support India's ambitious infrastructure goals.