Power Sector Financing - India: PFC-REC merger scheme announced, clarity awaited on government shareholding

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Power Sector Financing - India: PFC-REC merger scheme announced, clarity awaited on government shareholding

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Power Sector Financing - India

PFC-REC merger scheme announced, clarity

awaited on government shareholding

Merger Acquisition Divestiture

Breaking News 29 June 2026

Equity• REC to be absorbed into PFC at a 0.88 swap ratio, creating a unified PSU power

India

financier, subject to regulatory approvals. Diversified Financial Services

• Key benefits from the merger (i) scale and policy role, (ii) stronger balance sheet, (iii)

energy transition positioning Pujita Pasumarthi >> Research Analyst

BofAS India

+91 22 6632 3058

Merger swap ratio announced at 0.88x pujita.pasumarthi@bofa.com

PFC and REC boards have approved the scheme of amalgamation for the merger of REC

into PFC on a going-concern basis, leading to the dissolution of REC without winding up. Abbreviations:

Under the approved terms, REC shareholders will receive 88 equity shares of PFC for

every 100 shares held (swap ratio of 0.88), subject to requisite regulatory and statutory AQ – Asset Quality

approvals. Strategically, the merger aims to create a larger, unified PSU power financier

DISCOM – Distribution Companywith a stronger balance sheet and enhanced capacity to support India’s power sector

growth and energy transition. NCLT – National Company Law

Tribunal

Key aspects to watch in the near term

Key near-term monitorable aspects include (i) government shareholding in the merged PPA - Power Purchase Agreement

entity, which comes below 51% threshold (vs 56% currently in PFC) based on the swap

PSU – Public Sector Undertakingratio approved by boards, implying the need for the government to bridge the gap to

retain the “government company” status, where the path adopted will be critical to