Power Finance Corporation to acquire REC

Power Finance Corporation (PFC) and REC have said that their respective boards have cleared a merger that will combine the companies under PFC in an all-share deal, thus creating a single financing entity with a loan book of over ₹11 lakh crore.

The share exchange ratio has been set at 88 equity shares of PFC of face value ₹10 for every 100 equity shares of REC of face value ₹10 each.

PFC and REC are both public sector companies, and PFC holds 52.63 per cent REC, a majority stake it had purchased for for ₹14,500 crore in 2019.

The merged company is expected to emerge as a principal institution for implementing power sector reforms, “serving as the primary vehicle for translating national policy objectives into measurable sectoral outcomes”.

PFC has said that its lending strategy is aligning “with India’s green energy goals by financing renewable and energy-efficient projects across solar, wind, biomass, and waste-to-energy”.

The company expects to serve as a key financier of India’s energy transition, by combining scale, technical expertise and sector knowledge.

Deloitte Touche Tohmatsu India acted as Transaction and Tax Advisor and Cyril Amarchand Mangaldas acted as Legal Advisor, to both PFC and REC. RBSA Valuation Advisors LLP was appointed by PFC and Ernst & Young Merchant Banking Services LLP was appointed by REC, for providing joint valuation reports. SBI Capital Markets was appointed by PFC and Nuvama Wealth Management was appointed by REC, for providing fairness opinions on the joint valuation reports.