NEW DELHI: The boards of state-run power sector financiers Power Finance Corporation (PFC) and REC Limited have decided to proceed with the merger of the two entities. In separate stock exchange filings, both companies announced that their boards have cleared the proposal for approval by the President of India, as required under their Articles of Association.
Merger Details
The filings clarified that REC would be merged into PFC under sections 230-232 of the Companies Act, 2013. Once the merger becomes effective, all assets and liabilities of REC will be transferred to PFC, and REC will cease to exist as a separate entity. The government had announced the merger in the Union Budget, with both boards granting in-principle approval on February 6.
Share Exchange Ratio and Timeline
REC stated in its exchange filing that the share exchange ratio has not yet been finalized and will be determined by valuers appointed for the purpose. The companies also did not indicate any timeline for completion of the merger or spell out the future management structure of the combined entity. However, officials said the merger is targeted to take effect from April 1, 2027, subject to regulatory and government approvals.
Government Stake and Capital Infusion
The government holds nearly 56% stake in PFC and 52.6% in REC, with the remainder held by public shareholders. PFC's filing indicated that the Centre may infuse capital or issue securities, if required, to ensure the merged entity continues to retain its status as a government company. The company also said its trading window for dealing in shares and listed debt securities will remain closed until further orders.
