REC-PFC merger gets presidential approval in 2026

What has been approved and why it matters

The President of India has approved the merger of REC Ltd into Power Finance Corporation (PFC), a key step in consolidating two state-run power-sector financiers. The Ministry of Power conveyed this approval to REC through a letter dated June 10, 2026, as disclosed in REC’s regulatory filing. The decision comes nearly seven years after PFC acquired the government’s majority stake in REC in 2019.

The approval matters because it moves the process from an announced intent to a formally cleared proposal at the highest level for these government-linked entities. But the merger still needs to be “duly approved under the applicable law and being made effective” before it is implemented, as REC stated.

The 2019 acquisition that set the stage

In March 2019, PFC completed the acquisition of the government’s majority stake of 52.63% in REC Ltd. The consideration for this transaction was ₹14,500 crore. After this acquisition, REC became PFC’s subsidiary, and the relationship created a path for later consolidation.

The merger approval in 2026 follows this ownership structure and aligns with the government’s broader objective of creating scale in public sector NBFCs operating in the power ecosystem.

Timeline of key approvals and disclosures

REC stated that the Ministry of Power conveyed the Competent Authority’s approval for the merger via its June 10, 2026 letter. Earlier, on May 16, the Board of Directors reserved the merger proposal in view of the requirement of the President of India’s approval. The updates were communicated through regulatory filings.

REC also disclosed that the June 10 approval was shared in compliance with Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

What happens to REC after the merger

REC has said that once the merger is approved under applicable law and becomes effective, all of REC’s assets and liabilities will be transferred to PFC. Post-transfer, REC will stand dissolved.

The process is to be carried out in accordance with Sections 230 to 232 of the Companies Act, 2013, which govern compromises, arrangements, and amalgamations.

How the combined entity is expected to be structured

PFC’s board had approved moving ahead with the merger proposal, with a share exchange ratio to be determined by valuers. The filings also indicated that an important condition is that the merged entity should continue to retain its status as a “Government Company.” The disclosures noted that this may involve additional steps, including potential capital infusion or issuance of securities by the Central Government, if required.

Separately, PFC and REC also stated in filings that they are moving ahead with the proposed merger following the 2026-27 Budget announcement, with the combined entity expected to benefit from a stronger balance sheet, improved capital efficiency, and operational synergies.

Budget signal: restructuring public sector NBFCs

Finance Minister Nirmala Sitharaman, in her budget speech this year, referred to the merger of REC and PFC. She framed it as part of a plan to achieve scale and improve efficiency in public sector NBFCs. She described the move as a first step to restructure Power Finance Corporation and REC (erstwhile Rural Electrification Corporation).

This provides policy context to the merger and explains why the process was linked to government approvals and the maintenance of “Government Company” status.

Market reaction and investor watchpoints

The merger-related announcements also kept both stocks in focus. As of June 11, 2026 at 10:04 AM, REC shares on the NSE were trading at ₹340.75, down 2.31% from the previous close, as reported.

In another market update tied to PFC board action on the merger, shares of PFC fell 1.5% to ₹413.55, while REC declined 3.5% to ₹357 during Monday’s session, according to the report cited in the provided text. These price moves reflect investor sensitivity to pending details such as the final merger structure, swap ratio, and timelines.

Compliance actions: trading window and disclosures

One update in the disclosures was that the trading window for all equity shares and listed debt securities, including tax-free bonds, would remain closed until further notice. This was positioned as a standard measure around price-sensitive information.

REC also stated that the June 10, 2026 communication was disclosed under SEBI’s Regulation 30 requirements, underscoring that the approval was treated as material information for investors.

Key facts table

Why the merger is strategically significant

The merger would combine two major public sector financiers focused on the electricity sector. The government’s stated rationale, as referenced in the Budget speech, is to achieve scale and improve efficiency in public sector NBFCs. Company filings cited potential benefits such as stronger balance sheet, improved capital efficiency, and operational synergies.

At the same time, the eventual merger mechanics remain central for investors. The share swap ratio is to be determined by valuers, and the merged entity must continue as a government company. The disclosures also indicated that additional steps may be used to preserve that status.

What to watch next

REC has clarified that the transfer of assets and liabilities, and the dissolution of REC, would occur only after the merger is approved under applicable law and becomes effective. That makes the remaining statutory and regulatory process the next key milestone.

Investors will likely track further exchange filings for the merger scheme, the valuation-led swap ratio, and the sequence of approvals required to make the amalgamation effective under the Companies Act framework.