REC-PFC merger approved: What happens to the stake held by shareholders 

REC-PFC merger approved: Shares of Power Finance Corporation (PFC) and REC faced selling pressure on Monday after the two state-owned lenders formally approved their long-awaited merger. This paves the way for the creation of India's largest power sector financing institution with a combined loan book of more than Rs 11 lakh crore.

PFC shares slipped 1.83% to Rs 424.75, while REC fell 0.32% to Rs 363.50 in morning trade as investors reacted to the announcement.

In separate regulatory filings, both companies said their respective boards had approved the Scheme of Merger under Sections 230 to 232 of the Companies Act, 2013. As part of the scheme, REC will be amalgamated into PFC, subject to statutory approvals.

Under the approved share-swap arrangement, REC shareholders will receive 88 equity shares of PFC for every 100 equity shares held in REC. The record date for determining shareholder eligibility will be announced separately by the boards of the two companies.

The proposed merger is still subject to approvals from shareholders, creditors, regulators and other government authorities. In addition, the scheme requires the merged entity to continue qualifying as a government company under the Companies Act, with the Government of India retaining majority ownership, voting rights and management control.

According to the companies, the merger is expected to create a stronger and more efficient financing institution with an aggregate loan portfolio exceeding Rs 11 lakh crore. The combined entity is expected to benefit from greater scale, improved operational efficiencies and enhanced financing capabilities for India's rapidly expanding power and infrastructure sectors.

Several leading advisory firms have been appointed to oversee different aspects of the transaction. Deloitte Touche Tohmatsu India LLP is serving as the transaction and tax advisor, while Cyril Amarchand Mangaldas is acting as the legal advisor. 

Joint valuation reports have been prepared by RBSA Valuation Advisors LLP and Ernst & Young Merchant Banking Services LLP. Meanwhile, SBI Capital Markets and Nuvama Wealth Management have provided fairness opinions for PFC and REC, respectively.

The board's approvals mark a key milestone in the government's consolidation plan for the two public sector lenders. Finance Minister Nirmala Sitharaman had first announced the proposed restructuring in the Union Budget 2026 as part of the government's broader strategy to improve operational efficiency, strengthen lending capacity and create a larger, globally competitive power sector financing institution.