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PFC and REC Boards Approve Merger With 88:100 Share Swap

Creating a government-controlled lender with a combined loan book above Rs 11 lakh crore requires shareholder, creditor and regulatory approvals

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.
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Overview

  • The boards of Power Finance Corporation and REC approved a Scheme of Merger on Monday and fixed the exchange ratio at 88 equity shares of PFC for every 100 equity shares of REC.
  • The merger must still clear statutory steps under Sections 230–232 of the Companies Act, including votes from shareholders and creditors plus approvals from regulators and other government authorities.
  • Advisers and valuers have been appointed to the transaction, with Deloitte as transaction and tax adviser, Cyril Amarchand as legal adviser, RBSA and EY preparing joint valuations, and SBI Capital Markets and Nuvama providing fairness opinions.
  • The consolidated entity is designed to remain a government company with the Government of India keeping majority ownership and control, and will have an aggregate loan book above Rs 11 lakh crore.
  • Investors reacted with modest selling pressure on both stocks and a record date for eligible REC shareholders has not yet been announced as the parties move to seek formal stakeholder consents.