PFC slips 5% following Cabinet nod on merger with REC

The government has a total 58.3% stake in REC, the remainder of which is part of Bharat 22 ETF and CPSE ETF. The move will help the Centre meet its disinvestment target of Rs 800 billion for FY19

Shares of Power Finance Corporation (PFC) fell as much as 4.76 per cent to Rs 85.95 per share on the BSE in morning trade on Friday after the Cabinet Committee on Economic Affairs (CCEA) Thursday gave an in-principle approval to the strategic sale of the Centre’s 52.63 per cent holding in REC to PFC, along with transfer of management control.

The government has a total 58.3 per cent stake in REC, the remainder of which is part of Bharat 22 ETF and CPSE ETF. The move will help the Centre meet its disinvestment target of Rs 800 billion for FY19.

The government said the acquisition intends to achieve “integration across the power chain, obtain better synergies, create economies of scale, and have enhanced capability to support energy access and efficiency to finance the power sector. It may allow for cheaper fundraising, with an increase in bargaining power for the combined entity.” 

Business Standard had reported on Thursday that the power ministry believes PFC's acquisition of government’s stake in REC makes more financial sense for both the companies. Officials in the Department of Investment and Public Asset Management (DIPAM) had backed a proposal by REC to buy the Centre’s 65.6 per cent stake in PFC. The Centre’s stake in PFC is valued at nearly Rs 160 billion, while its 58.3 per cent stake in REC is valued at Rs 120 billion. READ MORE

At 10:04 am, PFC was trading at Rs 87 on the BSE, down 3.60 per cent against previous day's close of Rs Rs 90.25. A total of 14.07 million shares were traded on the NSE and BSE so far.