PFC-REC Merger Wins Presidential Nod, Seven Years After Stake Buy

The government gave its final clearance to the merger of REC Ltd into Power Finance Corporation, nearly seven years after PFC bought the state's majority holding in the power-sector lender.

President Droupadi Murmu approved the combination under the Companies Act, according to a REC regulatory filing. The Ministry of Power conveyed the decision in a June 10 letter. REC's board had reserved the proposal on May 16, pending the presidential sign-off.

The merger will transfer all of REC's assets and liabilities to PFC. REC will then dissolve under Sections 230-232 of the Companies Act. The process still requires approval under applicable law before it takes effect.

Finance Minister Nirmala Sitharaman flagged the deal in her February budget speech. Restructuring state-run non-bank lenders, she said, starts with merging PFC and REC to achieve scale and efficiency. The former Rural Electrification Corporation, now REC, has been PFC's subsidiary since March 2019, when PFC acquired the government's 52.63% stake for ₹14,500 crore.

PFC and REC are both central public sector enterprises focused on power-sector financing. Combining them creates a single large NBFC with a combined loan book that rivals any other state-owned financier. The government's rationale, as Sitharaman outlined, is operational scale and lower cost of funds.

No timeline for the merger's completion has been announced. The next step is a formal application to the National Company Law Tribunal for approval of the scheme.

REC trades on the BSE and NSE under the ticker RECLTD. PFC trades as PFC. The two stocks have moved largely in tandem since the budget announcement, with the spread between them narrowing on expectations the merger would close this year.