The boards of Power Finance Corporation and REC Ltd approved a merger scheme on Sunday, June 28, 2026, fixing an 88-to-100 share swap ratio that ends a six-year run for REC as a separately listed state-run power financier. The decision, filed to the exchanges the same evening, creates what both companies call India’s largest power sector financing institution, with an aggregate loan book of more than ₹11 lakh crore.
REC will fold into PFC under Sections 230 to 232 of the Companies Act, 2013, and the combined entity will continue to operate as a government company, with the Centre retaining majority voting rights and control. The next moves sit with shareholders, creditors and regulators rather than the two boards that just signed off.
Two Boards Sign Off on the Scheme
Both companies confirmed the approval through separate filings on Sunday. PFC said its board approved the “merger of REC into PFC and their respective shareholders and creditors, under Sections 230 to 232 and other applicable provisions of the Companies Act, 2013.” REC filed a matching approval.
The merged entity will carry an aggregate loan book of more than ₹11 lakh crore, the largest in India’s power sector financing. PFC listed the strategic benefits in its release, including emerging as the principal institution for implementing power sector reforms, an improved balance sheet, higher operational efficiency, and a stronger capital base. The company also said the merger would enable large-scale funding across the power sector value chain.
The scheme is conditional on shareholder and creditor approvals from both companies, stock exchange and Securities and Exchange Board of India clearance, and a National Company Law Tribunal order. The merged entity must also continue to qualify as a “Government Company” under the Companies Act, with the Centre retaining majority voting rights and control.
The 88-to-100 Swap, in Plain Numbers
REC shareholders will receive 88 fully paid-up equity shares of PFC of ₹10 each for every 100 fully paid-up equity shares of REC of ₹10 each that they hold, on a record date to be set later by both boards. Both companies have a face value of ₹10 per share. April 1 has been designated as the appointed date for the transaction, the point from which REC’s operations are treated as part of PFC for accounting purposes.
The ratio was fixed after an independent valuation by RBSA Valuation Advisors for PFC, with Ernst & Young Merchant Banking Services providing the parallel valuation for REC. SBI Capital Markets gave the fairness opinion on PFC’s side, and Nuvama Wealth Management on REC’s side. The run-up from Budget 2026 to the June 28 board approval tracks each step. The detailed merger scheme, including the formal record date, will be filed with the stock exchanges and the National Company Law Tribunal in the coming weeks.
Reading REC’s Shareholder Register
The shareholding pattern filed with BSE for the March quarter sets the size of the constituency the swap will touch. The Government of India held a 52.63% stake in REC at quarter-end; that stake sits inside PFC, which owns it since a 2019 acquisition. The government separately held 55.99% of PFC directly.
Beneath the government layer sits the broad public float. Mutual funds held a combined 9.02% of REC, led by Nippon India AMC at 1.28% and ICICI Prudential MF at 2.01%, with the rest spread across other asset managers. Life Insurance Corporation of India held 2.84%. The retail base is the largest single block in the public float, with 11.68 lakh small retail shareholders, defined as those with authorized share capital of up to ₹2 lakh, holding 10.21% of REC as of March 31.
That retail block is the constituency most likely to read every filing closely. The 88:100 ratio translates into fewer shares for each REC holder, though the per-share value of PFC stock will determine whether the swap is value-neutral, dilutive or accretive once the record date and prevailing prices are known. Public float holders with positions below the institutional tier will see the same math apply to their portfolios.
The numbers on the shareholding pattern are point-in-time snapshots from BSE filings. Updates filed between March 31 and the record date could move each percentage, but the broad shape of the register is unlikely to shift materially before the scheme is put to a vote.
From a 2019 Power Sector Sale to a 2026 Merger
The merger unwinds a structure the government itself created. In March 2019, PFC completed the acquisition of the Government’s 52.63% stake in REC for around ₹14,500 crore, making REC a subsidiary of PFC under a holding structure. Both institutions continued to operate independently despite overlapping lending mandates across the power value chain.
The push to fold them into a single entity came from the Union Budget on February 1, 2026, when Finance Minister Nirmala Sitharaman announced the government’s intent to restructure public sector non-banking finance companies in the power sector for scale and efficiency. PFC’s board gave in-principle approval on February 6, 2026, and REC’s board followed. Both boards moved the proposal to the President on May 16, 2026, and the Ministry of Power conveyed the President’s approval on June 10, 2026. The formal PFC statement on advisors and conditions lays out the corporate machinery behind those dates. The detailed merger scheme approved on June 28 is the corporate instrument that gives the consolidation its legal shape.
Who Got the Mandates
Six advisory mandates sit behind the scheme. Deloitte Touche Tohmatsu India is acting as Transaction and Tax Advisor to both PFC and REC. Cyril Amarchand Mangaldas is the Legal Advisor to both.
The valuation work was split: RBSA Valuation Advisors LLP was appointed by PFC, and Ernst & Young Merchant Banking Services LLP by REC, to produce joint valuation reports. Fairness opinions came from SBI Capital Markets for PFC and Nuvama Wealth Management for REC. The structure of separate advisors on each side is standard for a scheme of this size. It gives each set of shareholders its own independent voice on whether the swap ratio is fair.
The appointed date for the merger is April 1. The detailed scheme will spell out the precise mechanics of share issuance, record-keeping and timelines in the weeks ahead.
What Still Has to Be Cleared
The board approval is one of several gates. The scheme now goes to the shareholders and creditors of both companies for votes, then to the stock exchanges and SEBI for listing-related clearances. The proposal then moves to the National Company Law Tribunal for the formal sanction order under Section 230 to 232.
Until each of those gates opens, REC continues to trade as a separate listed entity. The record date for the swap will be set after the NCLT order. The actual share issuance to REC shareholders will happen once that record date is in place. PFC’s statement makes the dependency explicit: the scheme is conditional on “receipt of all requisite approvals and consents required under applicable law.”
What the Two Stocks Are Telling You
REC closed at ₹364.4 last Thursday, little changed on the day. The stock has been flat for the year so far and trades well below its record high of ₹654.
| Stock | Last close | Year-to-date | Record high |
|---|---|---|---|
| REC | ₹364.4 | Flat | ₹654 |
| PFC | ₹433.4 | Up 20% | ₹580 |
PFC closed 0.8% lower at ₹433.4 the same day. The stock is up 20% year-to-date and well below its peak of ₹580. The two stocks have moved differently through 2026: PFC’s 20% gain has come on the back of strong public sector NBFC sentiment, while REC has been weighed down by both swap ratio anxiety and pre-merger positioning. Both stocks fell when the boards gave their in-principle nod on February 9, 2026, with PFC slipping between 1.5% and 2.4% and REC between 3.1% and 3.5%.
The pattern suggests the market is treating the merger as a strategic positive on a long horizon and a near-term overhang on both stocks until the swap’s economics are clear. Investors looking for a price read between the boards’ in-principle nod and the formal scheme will be parsing the same set of numbers. The next concrete catalyst is the filing of the detailed scheme with the stock exchanges and the NCLT, which will set out the record date.
Frequently Asked Questions
What is the share swap ratio in the PFC-REC merger?
Shareholders of REC will get 88 equity shares of PFC in exchange for every 100 shares of REC they own as on the record date, which has yet to be fixed by the boards of both companies.
Will the merged entity remain government-controlled?
Yes. PFC’s statement makes it a condition of the scheme that the merged entity continues to qualify as a Government Company under the Companies Act, 2013, with the Centre keeping majority voting rights.
Do REC and PFC shareholders need to vote?
Yes. The scheme is conditional on shareholder and creditor votes from both companies, plus SEBI, stock exchange and NCLT clearances.
What happens to REC’s stock listing after the merger?
REC will be merged into PFC under an absorption route and will cease to exist as a separate listed entity once the scheme becomes effective.
How does this affect LIC and mutual fund holdings in REC?
Mutual funds together held 9.02% of REC at the end of the March quarter, with LIC holding 2.84%. Their holdings will be swapped for PFC shares on the same 88-for-100 basis that applies to every other REC shareholder.
Disclaimer: This article is for informational purposes only and is not investment advice. PSU share prices and ratios are accurate as of publication and may change. Readers should consult a qualified financial advisor before making investment decisions related to this merger.
