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

What the boards approved and why it matters

Power Finance Corporation (PFC) and REC Ltd have approved a long-awaited merger scheme. Both companies disclosed the decision through exchange filings dated June 28, 2026. The merger is structured as an absorption of REC into PFC. If completed, it is positioned to create India’s largest power sector financing entity. The combined loan book is stated to be over ₹11 lakh crore. The announcement also sets a finalised share exchange ratio, which investors tracked closely in early trade.

Share swap ratio: what REC shareholders get

The approved share exchange ratio is 88 equity shares of PFC for every 100 equity shares of REC held. Both companies said the shares involved are ₹10 each and fully paid up. Under the scheme, REC shareholders will receive PFC shares based on a record date that will be announced later. After the merger, REC shares held by investors will be cancelled. There is no cash consideration mentioned for the transaction. This makes the deal a pure share-swap arrangement.

Appointed date and how the merger is structured

The scheme provides for the merger to take effect from April 1 as the appointed date. REC will be amalgamated into PFC, based on the board-approved scheme. The filings describe a transfer of REC’s assets, liabilities, contracts, employees and business operations to the merged entity. After completion, REC will cease to exist as a separately listed company. The merger is being pursued under Sections 230 to 232 of the Companies Act, 2013. The structure implies continuity of business through the surviving entity, PFC.

Approvals still pending before the deal becomes effective

The board approvals do not complete the transaction. The merger will require approvals from shareholders and creditors, as well as regulatory clearances. The companies have indicated approvals are required from stock exchanges and the Securities and Exchange Board of India (SEBI). The National Company Law Tribunal (NCLT) will also need to approve the scheme. Other statutory authorities may be involved as part of the process. The record date for the share exchange will be announced later by the boards.

How markets reacted: PFC down, REC mixed

The market reaction was cautious after the share swap ratio was announced. PFC declined 1.75% to ₹425.10, while REC edged up 0.08% to ₹364.95 after the board decisions. In another reported update during Monday trade, PFC was down about 1.9% near ₹424, while REC was up 0.07% around ₹365. A separate market snapshot noted PFC fell as much as 1.96% to ₹424 on the BSE, taking its market capitalisation to about ₹1.4 lakh crore. REC was reported down 0.27% to ₹363.55, with market capitalisation around ₹95,730 crore. The intraday moves suggested investors were adjusting positions around the final exchange ratio.

What determined the exchange ratio

The exchange ratio was determined using valuation work and independent checks referenced by the companies. A joint valuation report dated June 28, 2026 is cited in the disclosures. The valuers named were Ernst & Young Merchant Banking Services LLP and RBSA Valuation Advisors LLP. The filings also mention fairness opinions from SBI Capital Markets Limited and Nuvama Wealth Management Limited. These steps are typically used to support that the ratio is reasonable for both sets of shareholders. The ratio, however, still needs shareholder and regulatory sign-offs.

Government ownership and status after the merger

The scheme requires the merged entity to retain its status as a Government Company. It also requires that the Government of India continues to hold majority voting rights. This condition is explicitly referenced as part of the approvals and structure described. For investors, this is relevant because both PFC and REC are state-owned lenders in the power financing ecosystem. The continuing government control can influence governance, capital allocation, and policy alignment. The filings do not describe changes to business focus beyond the consolidation.

Indicative roadmap and timing references in the reports

A roadmap reviewed by Moneycontrol described a sequence of steps around implementation. It referred to the draft scheme being finalised in June, followed by board and shareholder approvals. It also pointed to regulatory clearances expected by early 2027. The same roadmap indicated the merger becoming effective from April 1, 2027. These timing references are indicative and dependent on approvals from multiple authorities. The companies have also separately mentioned April 1 as the appointed date under the scheme.

Key facts at a glance

Why the merger matters for the power finance landscape

The merger consolidates two state-run lenders that finance India’s power sector. A combined loan book of over ₹11 lakh crore indicates a larger balance sheet and a more concentrated role in sector funding. The deal also simplifies the listed structure by folding REC into PFC and ending REC’s separate listing after completion. The share swap ratio is central because it defines how ownership shifts between PFC and REC shareholders. The multiple-stage approval process means the market will track regulatory feedback and shareholder voting outcomes. For now, the confirmed facts are the board approvals, the 88:100 ratio, and the list of required clearances.

Conclusion

PFC and REC have moved the merger process forward by securing board approval and fixing the 88:100 share swap ratio. The next steps are shareholder votes, a record date announcement, and regulatory approvals including SEBI and NCLT. Market pricing in PFC and REC reflected immediate scrutiny of the exchange terms. The timeline beyond this depends on the completion of the statutory process, with reports pointing to early 2027 clearances and an April 1, 2027 effectiveness as an indicative roadmap milestone.