PFC approves in-principle merger proposal with REC after Budget 2026 push

PFC's board has approved an in-principle merger with REC after the Budget 2026 proposal to restructure the two public-sector NBFCs. The merger details are yet to be finalised

State-owned Power Finance Corporation (PFC) on Friday said its board has approved an in-principle merger with REC, formerly Rural Electrification Corporation. 

The merger follows PFC’s acquisition of the government’s entire 52.63 per cent stake in REC Limited in 2019, the power projects financier said in a BSE filing. The Centre currently holds a 56 per cent stake in PFC.

 

The development also comes days after Union Finance Minister Nirmala Sitharaman proposed restructuring REC and PFC as part of the government’s efforts to strengthen public sector financial institutions.

 

"In order to achieve scale and improve efficiency in the public sector NBFCs, as a first step, it is proposed to restructure PFC and REC," Sitharaman said in her Budget speech. In her post-Budget press conference, she said the aim is to rationalise and streamline the system.

 

In March 2019, PFC acquired a majority stake in REC after paying ₹14,500 crore to the Centre and had expected the two companies to merge in 2019-20. However, the plan did not materialise. It bought 1,039.4 million government-held shares, amounting to a 52.63 per cent stake, along with management control, at a price of ₹139.50 per share.

 

Both PFC and REC are Navratna central public sector enterprises, and the acquisition was aimed at bringing together firms operating in the same sector. Experts have said the Budget proposal to restructure the two was aimed at enhancing their operational efficiency, and that it could serve as a template for restructuring other public sector NBFCs.

 

The details of the merger, however, are yet to be finalised and will be shared later, PFC said. A senior analyst had previously told Business Standard that the merger of two entities of this size could create fresh challenges because their lenders may hit exposure norms and may not be able to increase lending.

 

What did PFC report in its Q3FY26 results?

PFC posted a nearly 6 per cent increase in its consolidated net profit to ₹8,211.90 crore for the third quarter of the financial year 2025-26 (Q3FY26). It had reported a profit of ₹7,759.56 crore during the same quarter last year.

 

The company's total income rose about 9 per cent year-on-year (Y-o-Y) to ₹29,140.57 crore from ₹26,821.84 crore in the corresponding period of the preceding financial year.

 

PFC's consolidated loan book stood at ₹11,51,407 crore as of December 2025, up from ₹10,69,436 crore at the end of 2024.

 

Shares of PFC closed 1 per cent higher at ₹419.2 apiece on the BSE on Friday, ahead of the merger announcement.