Power Finance Corporation Limited (PFC) and REC Limited (REC) have taken a major step towards creating one of India’s largest public sector financing institutions. The Boards of Directors of both companies have approved a merger scheme under the provisions of the Companies Act, 2013, to combine REC with PFC.
Once the merger is completed, the combined entity will have a total loan book of more than INR 11 lakh crore. This will significantly strengthen its financial capacity and enable it to provide larger funding support for power, infrastructure, and other major development projects across the country. The merger is also expected to improve operational efficiency and create a stronger financing platform for India’s growing energy sector.
The merger, however, is subject to several important conditions before it can become effective. It will require approval from the shareholders and creditors of both PFC and REC. In addition, the proposal must receive all necessary permissions from the concerned regulatory and government authorities.
Another key requirement is that the merged company must continue to qualify as a “Government Company” under the Companies Act. For this to happen, the Government of India must retain majority voting rights and continue to have direct or indirect control over the merged entity after the transaction is completed.
The approved merger scheme also defines the share exchange ratio for REC shareholders. According to the official valuation report, REC shareholders will receive 88 fully paid-up equity shares of PFC, each having a face value of INR 10, for every 100 fully paid-up equity shares of REC with the same face value.
The new PFC shares will be issued to eligible REC shareholders based on a record date. This record date will be decided jointly by the Boards of Directors of PFC and REC and announced at a later stage.
The proposed merger represents a significant move by the government to consolidate public sector power financing institutions. By combining the strengths of both companies, the merged entity is expected to play a bigger role in supporting India’s expanding power and infrastructure sectors.
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