PFC-REC merger 2026: 88:100 swap, Rs 11 lakh cr

What the boards approved on June 28, 2026

REC Limited and Power Finance Corporation Limited (PFC) have approved a scheme of merger that will combine the two state-run power sector financiers into a larger entity. The approval date cited for the scheme is June 28, 2026. Under the structure outlined, REC will be absorbed into PFC, and REC will cease to exist as an independent company once the merger becomes effective. All assets and liabilities of REC are set to transfer to PFC in line with the process prescribed under the Companies Act, 2013.

The merger is positioned as a consolidation within the public sector NBFC ecosystem focused on power sector funding. The combined lender is expected to have an aggregate loan book of over Rs 11 lakh crore, based on disclosures and reports referenced in the provided material. For investors, the most immediate, concrete takeaway is the share exchange ratio now approved by the boards.

Share exchange ratio: 88 PFC shares for 100 REC

The boards approved a share exchange ratio of 88 equity shares of PFC for every 100 equity shares of REC. The face value of equity shares for both companies is Rs 10, and the swap is specified as fully paid up shares. Importantly, the scheme notes that there is no cash consideration involved, meaning REC shareholders will receive shares of PFC rather than any cash payout.

Post-merger, REC shareholders will become shareholders of PFC based on the agreed exchange ratio. This is central to how minority shareholders participate in the consolidation, because the swap ratio determines the effective economic value transferred from REC to PFC holders.

Valuation and fairness opinions supporting the swap

The exchange ratio was determined using a joint valuation report dated June 28, 2026, issued by independent valuers. The valuers named in the material are Ernst & Young Merchant Banking Services LLP and RBSA Valuation Advisors LLP. The process was also supported by fairness opinions from SBI Capital Markets Limited and Nuvama Wealth Management Limited.

These elements matter because share-swap mergers typically rely on external valuation and fairness checks to support the ratio placed before shareholders and regulators. In this case, the report date and the firms involved are explicitly cited alongside the final swap ratio.

Government company status and majority voting rights

A stated requirement of the scheme is that the merged entity must retain its status as a “Government Company”. The material also specifies that the Government of India should continue to hold majority voting rights in the merged company. This condition is aligned with the broader context given, where the merger is framed as a way for the government to maintain majority stake cost-effectively.

Separate disclosures and reports included in the input also indicate that the Centre holds nearly 56% in PFC and 52.6% in REC, with the remainder held by public shareholders. Any merger structure that changes the shareholding pattern can affect whether the government remains in majority control, which is why this requirement appears directly in the scheme conditions.

Approvals still required before the merger becomes effective

Although the boards have approved the merger scheme, the transaction remains subject to approvals from shareholders, creditors, and regulatory authorities. The merger is referenced as being carried out under Sections 230-232 of the Companies Act, 2013. The material also notes that once effective, REC will be dissolved in line with the relevant provisions cited in filings.

This sequencing is important for investors tracking timelines. Board approval is a key step, but not the final one. The input also includes earlier disclosures that the companies had not provided a firm date for completion in certain filings, and that multiple statutory and regulatory clearances would be required.

How this consolidation built up: February to June 2026

The merger plan has been in motion for months. The material references an announcement dated February 6, 2026, when restructuring of PFC and REC was taken up to achieve scale and improve efficiency in public sector NBFCs, and REC’s board granted in-principle approval.

A separate milestone came on June 10, 2026, when the President of India approved the merger of REC into PFC, as conveyed by the Ministry of Power through a letter dated June 10, 2026, according to the material. Even with this approval, the completion was described as contingent on further board decisions and regulatory clearances in the cited reports.

Key facts table

Market impact: what investors can measure from the disclosures

The clearest market-relevant variables in the material are the final share exchange ratio (88:100) and the scale of the combined loan book (over Rs 11 lakh crore). The absence of cash consideration means the deal mechanics are entirely equity-based for REC shareholders. Another measurable element is governance-related: the scheme’s condition that the merged entity must remain a government company with majority voting rights for the Government of India.

The input also includes earlier reporting that the share swap ratio was awaited and would be determined by independent valuers, highlighting why the publication of a specific ratio is material for investors following the merger. Where some earlier filings and reports pointed to uncertainty, the board-approved ratio and the named valuers now provide a defined basis for shareholder evaluation.

Why the merger matters for the power-sector financing landscape

Both PFC and REC are central lenders to India’s power ecosystem, and the merger is designed to create a larger financing entity. The stated rationale in the provided material includes achieving scale and improving efficiency in public sector NBFCs. The combined loan book figure cited suggests the merged lender will be a very large participant in power-sector credit.

From a process standpoint, the merger is structured as an amalgamation of REC into PFC, with a defined swap ratio supported by valuation and fairness opinions. And the explicit government-company condition signals that ownership and voting control are not just consequences of the transaction, but also constraints shaping how it is implemented.

What to watch next

The scheme remains subject to shareholder, creditor, and regulatory approvals. Investors will also track subsequent statutory steps and any clarifications in detailed scheme documentation filed through the approval process.

For now, the key published markers are the June 28, 2026 board approval, the 88 PFC shares for every 100 REC shares swap, the no-cash structure, and the requirement that the merged company continues as a government company with majority voting rights held by the Government of India.