PFC-REC Merger: Key Terms, Swap Ratio, Timeline 2027

Merger plan moves from proposal to formal scheme

Power Finance Corporation (PFC) and REC Limited (REC) have taken a key step toward consolidation after their Boards of Directors approved a Scheme of Merger. Under the scheme, REC is the transferor company and will merge into PFC, the transferee company. PFC said the scheme is proposed under Sections 230 to 232 and other applicable provisions of the Companies Act, 2013. The board approval was cleared on a Sunday, as per the company statement. The proposed transaction is part of a broader government-led restructuring of public sector power-sector NBFCs. PFC is already the holding company, with a majority stake in REC.

What the scheme says: REC to merge into PFC

The scheme sets out a straightforward direction of merger: REC will be absorbed into PFC. After the merger becomes effective, REC will cease to exist as a separate legal entity, and its assets and liabilities will move to PFC. The companies have positioned the merger as a shift from a parent-subsidiary structure to a single integrated lender. That structure is intended to reduce duplication across two entities operating in the same sector under the Ministry of Power. The scheme still requires multiple approvals before it can be implemented.

Conditions and approvals still needed

PFC said the scheme is conditional upon receiving all requisite approvals and consents required under applicable law. These include approvals from shareholders and creditors of both companies and permissions from relevant regulatory and governmental authorities. The scheme is also conditional on the merged entity continuing to qualify as a “Government Company” under the Companies Act, 2013. In addition, the Government of India must continue to retain majority voting rights and control in the merged entity, directly or indirectly. These conditions matter because they influence governance, regulatory treatment, and market perception of sovereign backing.

Size of the combined lender: loan book crosses ₹10.8 lakh crore

PFC said the merger would create a power-financing entity with an aggregate loan book of over ₹11 lakh crore. Another set of disclosed metrics in the public narrative pegs Combined Assets Under Management (AUM) at ₹10.81 lakh crore. The same snapshot lists unified net worth at approximately ₹1.51 lakh crore. PFC’s current stake in REC is stated at 52.63%, reflecting PFC’s status as the holding company since acquiring the Government of India’s stake in 2019. The consolidation is being described as a move to create a single-window financing platform for the power sector.

Share exchange ratio: what is known and what is pending

One disclosed share exchange ratio, pursuant to the scheme and valuation report, states that REC shareholders would receive 88 fully paid-up equity shares of PFC (face value ₹10 each) for every 100 fully paid-up equity shares of REC (face value ₹10 each). The issuance would be to REC shareholders as of a record date to be determined in the future by the Boards of PFC and REC, as applicable. Separately, an indicative market snapshot also referred to a swap ratio estimate of about 8 PFC shares for every 9 REC shares, with valuation pending. The article context also states that independent valuers will determine the final ratio and that it will be reviewed by the boards.

June 28, 2026 board meeting and the President’s approval

PFC’s board is scheduled to meet on June 28 to evaluate the definitive merger of REC into PFC, as referenced in the update. A key regulatory milestone cited is Presidential approval. The Ministry of Power conveyed the President of India’s approval through a letter dated June 10, 2026, according to REC’s regulatory filing. The development is presented as moving the merger from board-level steps to government-level approval, while still leaving the merger terms and remaining approvals pending.

Why the consolidation is being pursued

The stated rationale across the updates is scale and efficiency, including the removal of operational redundancies created by maintaining both a holding company and a listed subsidiary doing similar lending activity. The merged entity is also described as having greater lending capacity on a consolidated balance sheet. One operational point highlighted is exposure limits for NBFCs, with RBI norms capping single-project exposure at 25% of an NBFC’s capital base. The combined lender is expected to have a larger platform to support big-ticket projects, including green hydrogen and nuclear power, while staying within exposure constraints mentioned in the context.

Market reaction and investor focus areas

The merger has kept both stocks under investor watch, with a cited instance of price reaction following in-principle approval earlier in 2026. In that session, PFC shares fell 1.5% to Rs 413.55 and REC declined 3.5% to Rs 357. Investors are also focused on the eventual swap ratio, the timing of record date determination, and the path of approvals across shareholders, creditors, and regulators. Another investor-relevant detail is continuity of liabilities, with the update stating that liabilities, including retail deposits and bonds, will be transferred to PFC as the surviving entity with the same sovereign-backed guarantee and safety rating.

Timeline and target completion date

PFC chairman and managing director Parminder Chopra said PFC and REC are targeting completion of the proposed merger by April 1, 2027. Chopra also said both boards have already given in-principle approval, and that legal advisers, transaction advisers, merchant bankers, and registered bankers have been appointed for the process. The merger itself was proposed in the Union Budget speech on February 1, 2026, where the Finance Minister announced consolidation of PSU NBFCs in the power sector. Subsequent milestones include board steps in early February 2026 and the President’s approval conveyed on June 10, 2026.

Key facts at a glance

Conclusion: big step forward, but execution still pending

The PFC-REC merger has moved deeper into formal execution with board approvals of a merger scheme and Presidential approval conveyed in June 2026. Even so, the merger remains subject to statutory, regulatory, shareholder, and creditor approvals, along with confirmation of the final valuation and swap mechanics. The next immediate milestone is the PFC board’s June 28, 2026 review of the definitive merger scheme. The companies have indicated a target to complete the consolidation by April 1, 2027, subject to the approvals and process steps outlined.