PFC-REC merger wins President approval, next steps 2026

President clears REC’s merger into PFC

Power Finance Corporation (PFC) and REC Ltd have received the President of India’s approval for the proposed merger of REC into PFC, according to separate regulatory filings made to stock exchanges. The Ministry of Power conveyed the approval through a letter dated June 10, 2026, the companies said. The development moves the long-discussed consolidation of the two state-run power-sector financiers closer to execution.

The companies indicated the transaction will be implemented under Sections 230-232 of the Companies Act, 2013, which govern compromise, arrangement and amalgamation. While the approval is a key milestone, the merger is still subject to further board decisions and multiple statutory and regulatory clearances before it becomes effective.

What the regulatory filings said

REC said the Ministry of Power, through its June 10, 2026 communication, conveyed approval of the competent authority, the President of India, for the merger proposal. PFC also disclosed the same approval in its filing. Both filings position the move as part of a broader government-driven restructuring plan aimed at creating a larger public-sector financing institution focused on the electricity value chain.

The companies also outlined the legal outcome once the merger becomes effective. All assets and liabilities of REC will transfer to PFC, and REC will be dissolved in line with the Companies Act provisions cited in the filings. PFC will remain as the surviving entity after the amalgamation.

How the merger will be structured

The merger is planned as an amalgamation of REC into PFC. A share exchange ratio will be determined by independent valuers, the filings noted, indicating that the swap will be based on an external valuation exercise rather than an internally fixed formula.

A key condition flagged by the lenders is that the combined entity will retain its status as a “Government Company” during and after the merger process. This condition matters because the government-company classification affects governance, oversight, and compliance obligations for public sector enterprises.

Approvals still pending

Despite the President’s approval, completion remains contingent on final board approvals and receipt of statutory and regulatory clearances. The companies have not provided a firm date for completion in the filings cited. They have also not disclosed the share swap ratio, which will only be known after independent valuation and the preparation of a detailed merger scheme.

This sequencing is consistent with the process under Sections 230-232, which typically requires a detailed scheme of amalgamation, appropriate filings, and clearances before the transaction is made effective.

The Budget 2026 trigger and the February board nod

The consolidation was set in motion by the Union Budget 2026, which proposed restructuring PFC and REC to achieve scale and efficiency in public-sector non-banking financial companies (NBFCs). PFC’s board gave in-principle approval for the merger on February 6, 2026, days after Finance Minister Nirmala Sitharaman outlined the restructuring plan.

Regulatory disclosures also refer to the proposal being approved pursuant to an in-principle approval by the Cabinet Committee on Economic Affairs (CCEA). The filings and related coverage position the merger as part of the government’s broader effort to strengthen the public sector NBFC structure.

Why the 2019 acquisition matters

The merger plan builds on PFC’s earlier acquisition of the government’s majority stake in REC. PFC acquired the government’s 52.63% stake in REC in 2019 for ₹14,500 crore (₹14,500 crore). That transaction made REC a subsidiary of PFC and created a holding-subsidiary structure that the government has now sought to simplify through a full amalgamation.

The proposed merger, if completed, would consolidate two Maharatna power-sector financiers into one surviving entity, with REC being dissolved and PFC absorbing its balance sheet.

Market reaction: shares down on the approval day

Market moves reported alongside the approval were modestly negative. On the National Stock Exchange, PFC shares ended at ₹431.30, down 1% on the day. REC shares closed at ₹348.80, down 0.9% from Tuesday.

Separate market snapshots around the merger news flow have shown volatility, with one report noting PFC falling 1.5% to ₹413.55 and REC declining 3.5% to ₹357 during a session following the board’s in-principle approval. Another reported BSE closes of ₹419.20 for PFC (down 1.01%) and ₹372.50 for REC (down 2.51%). These moves reflect investor caution while key details, especially the valuation and swap ratio, are still pending.

Key facts at a glance

Scale and balance sheet context cited in reports

Some reports around the merger discussion have cited large loan books for both financiers, illustrating why the government sees consolidation as a scale play. Figures mentioned include an approximately ₹11.5 lakh crore loan book for PFC and ₹5.8 lakh crore for REC (both expressed in ₹ crore terms: ₹11,50,000 crore and ₹5,80,000 crore).

A separate report also pointed to market capitalisation levels around the time of the Budget-related announcement: PFC’s market valuation was stated at 1.38 trillion rupees (₹1,38,000 crore) and REC’s at 981.14 billion rupees (₹98,114 crore). Since the Budget announcement cited in that report, PFC’s stock was said to have risen 5.8% and REC’s 2.3%, reflecting differing investor expectations as the restructuring path evolved.

What investors will watch next

The next stage is the detailed scheme and the valuation-led swap ratio, because these determine how value and ownership shift between shareholders of the two listed entities. Investors will also track the timeline for remaining statutory and regulatory clearances and the final approvals from the boards.

For now, the President’s approval formalises the government’s intent to proceed. The filings make clear that the merger becomes effective only after the remaining legal process is completed, at which point REC’s assets and liabilities would transfer to PFC and REC would be dissolved under the Companies Act framework.