The proposed PFC-REC merger has cleared a key regulatory hurdle after REC said it received a No Objection Certificate from the Reserve Bank of India on October 15, subject to specified instructions and conditions. The merger would combine two state-run power-sector lending institutions into a financing entity with an aggregate loan book of more than ₹11 lakh crore.
REC disclosed the RBI approval in a filing on the BSE on Friday. The company said the No Objection Certificate is not the final approval for the transaction and that the scheme remains subject to other statutory and regulatory clearances, along with approvals from the shareholders and creditors of the companies involved.
The boards of REC and Power Finance Corporation approved the proposed merger on June 28, 2026. Under the scheme, REC will merge into PFC, making PFC the transferee company. The transaction is designed to consolidate the two power-sector finance companies under a single institutional structure.
The proposed share exchange ratio is 88 fully paid-up equity shares of PFC, each with a face value of ₹10, for every 100 fully paid-up equity shares of REC. The shares would be issued to REC shareholders who are on a record date to be determined by the boards of PFC and REC at a future date, as applicable.
The merger has direct significance for the financing architecture supporting India’s power sector. PFC and REC are both state-run non-banking financial companies focused on lending to the power sector. The combined loan book disclosed by REC indicates the scale of financing that would be brought under the merged institution, although the filing does not provide a separate assessment of how lending operations, portfolios or management functions would be integrated.
REC said the scheme is also subject to the fulfilment of other conditions required under applicable laws and the provisions of the merger plan. These include the approvals and processes prescribed for the companies and their stakeholders. The company did not announce a final completion date for the transaction.
Several advisers have been appointed for the proposed merger. Deloitte Touche Tohmatsu India is acting as the transaction and tax adviser, while Cyril Amarchand Mangaldas is the legal adviser to both PFC and REC. RBSA Valuation Advisors LLP was appointed by PFC and Ernst & Young Merchant Banking Services LLP by REC to provide joint valuation reports. SBI Capital Markets and Nuvama Wealth Management were appointed by PFC and REC respectively to provide fairness opinions on the valuation reports.
The next steps will depend on the remaining statutory and regulatory approvals, including the required shareholder and creditor processes. The boards are also expected to determine the applicable record date for implementing the share exchange.
