The boards of directors of the Power Finance Corporation (PFC) and REC Limited have approved the scheme of merger of the two public sector non-banking financial companies that lend to power and infrastructure projects.

Under the arrangement, the two companies have agreed to a share-swap ratio of 88 PFC shares for every 100 REC shares held.

The merger proposals had been approved by the President of India earlier this month.

The merger is subject to the required regulatory and statutory approvals.

The companies said the merged entity would have an aggregate loan book of over ₹11 trillion (~$116.37 billion). They also stated that the merger is intended to create a larger financing institution for the power sector and support financing across generation, transmission, distribution, renewable energy, and other infrastructure segments.

PFC said its board of directors approved the proposed merger after considering recommendations from the Audit Committee and the Committee of Independent Directors.

The merger will be carried out under Sections 230 to 232 of the Companies Act, 2013, along with other applicable provisions of law.

Under the proposed program, REC will merge into PFC on a going concern basis from the appointed date defined in the program. Upon the merger becoming effective, REC will be dissolved without being wound up. PFC will issue new equity shares to eligible REC shareholders based on an exchange ratio of 88 fully paid equity shares of PFC, with a face value of ₹10 (~$0.1058) each, for every 100 fully paid equity shares of REC, with a face value of ₹10 (~$0.1058) each. There will be no cash consideration under the transaction.

According to the disclosure, PFC currently holds a 52.63% stake in REC on a fully diluted basis. The companies said the proposed share exchange ratio was determined using a joint valuation report prepared by Ernst & Young Merchant Banking Services and RBSA Valuation Advisors. Fairness opinions on the valuation were provided by SBI Capital Markets for PFC and Inuva Wealth Management for REC.

PFC reported a consolidated net worth of ₹1.73 trillion (~$18.31 billion) and turnover of ₹1.15 trillion (~$12.17 billion) in the financial year 2025-26. REC reported a consolidated net worth of ₹850.54 billion (~$8.99 billion) and a turnover of ₹595.84 billion (~$6.31 billion) during the same period.

The government holds majority stakes in both companies. Following an announcement in the Union Budget, PFC acquired 52.63% of the Union government’s stake in REC in February, making it a subsidiary of PFC.