REC–PFC Merger: Power Finance Corporation and REC Ltd.’s boards approved a merger scheme that will combine the two state-run non-banking financial companies into a single entity.
The proposed merger between REC and PFC is structured around a swap ratio of 100 shares of REC for 88 shares of PFC, effectively valuing REC at a slight premium when compared with both market pricing and book value benchmarks.
Based on current figures, REC shares priced at Rs 365 and PFC at Rs 433 imply a merger value of approximately Rs 381 per REC share. This creates a discount of about Rs 16 per share, or roughly 4.4 per cent, in REC’s current market price relative to its implied merger value.
REC’s implied price ratio stands at 0.8422 relative to PFC, while the ratio based on book value per share is slightly lower at 0.8015. Against these metrics, the actual swap ratio of 0.88 indicates that REC shareholders are being offered a premium of 4.49 per cent over market-implied valuation and nearly 9.8 per cent over book-value-based estimates.
From a broader valuation perspective, both entities trade at similar multiples. REC has a price-to-book (P/BV) ratio of 1.13 times, while PFC is slightly lower at 1.07 times. Post-merger, the combined entity’s P/BV is expected to settle around 1.10 times. Post the merger, the government will hold around 41.9 per cent stake, while LIC will own about 5.15 per cent. As of March 2026, the government holds about 56 per cent in PFC.
The decision was cleared at a board meeting held on June 28, 2026, following recommendations from the audit committee and the committee of independent directors, PFC said in a regulatory filing.
Under the plan, REC will be merged into PFC, with the former set to be dissolved without undergoing the process of winding up. Shareholders of REC will receive equity shares of PFC based on a pre-determined exchange ratio of 88 PFC shares (face value Rs 10 each) for every 100 REC shares (face value Rs 10 each), held as of the record date.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money related decisions.)
