PFC-REC merger: 88:100 swap, ₹11 lakh cr loan book

What the boards approved on June 28, 2026

Power Finance Corporation (PFC) and REC Limited said their boards approved a Scheme of Merger on June 28, 2026, according to late-night exchange filings. Under the scheme, REC will merge into PFC through absorption. The approvals mark a key step in a long-discussed consolidation of the two state-run power sector lenders. The companies said the merger is intended to create a larger financing entity in the power sector. They also indicated that the combined institution would remain a government company. The filings cited the merger scheme being undertaken under Sections 230 to 232 of the Companies Act, 2013.

Share swap ratio: 88 PFC shares for 100 REC shares

The merger scheme sets a fixed share exchange ratio for REC shareholders. REC shareholders will receive 88 equity shares of PFC for every 100 equity shares of REC held. Both companies said the exchange is for equity shares of face value ₹10 each and fully paid-up. The companies also stated there is no cash consideration involved in the transaction.

The share exchange will apply to shareholders as of a record date, which will be announced later by the boards of PFC and REC. Until the record date is declared and the process reaches the allotment stage, investors will continue to hold their existing listed shares as usual.

Loan book scale: above ₹11 lakh crore

PFC and REC said the merger would create a larger financing entity with an aggregate loan book exceeding ₹11 lakh crore. The stated rationale is to strengthen scale and operational efficiency. The companies also positioned the combined entity as a key institution for implementing power sector reforms and flagship programmes.

Separately, a market note cited in the available material described the combined asset base as about ₹10.7 lakh crore and suggested the merged lender could account for a large share of power sector lending. Regardless of the exact presentation, the common point across the disclosures is the expected creation of one of the largest specialised power sector financiers in India.

What happened to PFC and REC shares after the announcement

PFC and REC shares traded lower in early deals on Monday after the board approvals were disclosed. The move reflected a cautious initial market reaction even as the transaction advances to its next phase. No percentage move or price levels were provided in the available information.

Approvals still pending before the merger becomes effective

While board approval is a major milestone, the merger is not yet final. The scheme requires approvals from multiple stakeholders and regulators before it can become effective. The list of required clearances mentioned in the material includes:

• Shareholders
• Stock exchanges
• Securities and Exchange Board of India (SEBI)
• National Company Law Tribunal (NCLT)
• Other statutory authorities

In addition, an earlier report cited in the material said the timeline is subject to approvals from the Department of Investment and Public Asset Management (DIPAM). Only after these steps are completed can the scheme be implemented and the share exchange be executed.

Target timeline: roadmap points to April 1, 2027

A roadmap referenced in the material suggested the draft merger scheme was to be finalised in June, followed by approvals from the boards and shareholders. It also indicated regulatory clearances were expected by early 2027, with the merger becoming effective from April 1, 2027.

The exchange filing language also refers to the scheme being effective from April 1 as an appointed date under the merger plan. The available reporting links that appointed date to the targeted completion date of April 1, 2027, subject to the necessary approvals.

Valuation and fairness opinions cited for the swap ratio

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

These disclosures are meant to demonstrate that the swap ratio was set using independent valuation work and fairness assessments, a key requirement in large listed-company mergers.

Why the government-company status matters

Both boards said the merged entity will remain a government company, addressing questions around ownership and control after consolidation. The material also notes that the Government of India is expected to retain majority voting rights. For investors, this point is relevant because it frames the merger as an internal consolidation within the state-run financial ecosystem rather than a privatisation or change in sponsor control.

Key facts at a glance

What investors should track next

The next set of milestones will be process-driven rather than operational. Investors will watch for the announcement of the record date, the shareholder approval process, and the progression of regulatory filings with SEBI, stock exchanges, and the NCLT. Any updates on the targeted April 1, 2027 effective date will also be important, given the explicit dependence on approvals.

For REC shareholders, the central practical question is the completion of the swap and receipt of PFC shares at the 88:100 ratio. For PFC shareholders, the focus will be on the final merger terms as they move through the regulatory process, including confirmation that the combined entity continues as a government company.

Conclusion

PFC and REC have moved their long-awaited consolidation forward with board approvals and a defined 88:100 share exchange ratio. The transaction aims to create a power sector financing institution with a loan book above ₹11 lakh crore, but it remains contingent on shareholder and regulatory clearances, with an indicative target of April 1, 2027.