Govt mulling options to retain 51% stake in PFC post merger with REC, says official

New Delhi: The government is looking at options, including issuance of preference shares or fresh equity, to maintain 51 per cent stake in the state-owned Power Finance Corporation post its merger with REC, a senior official said.

Finance Minister Nirmala Sitharaman had in FY27 Budget announced restructuring of Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) to help achieve scale and improve efficiency in the public sector NBFC space.

“The government would like to retain a majority stake in the merged entity as it would be the largest government-owned NBFC with strategic presence. Discussions are going on over the options to ensure that government stake in the merged entity does not fall below 51 per cent,” the official said.

As per Companies Act, a ‘government company’ is one in which not less than 51 per cent of the paid-up share capital is held by the central government, or by any state government, and includes a company that is a subsidiary company of such a government company.

One of the options being discussed is issuance of preference shares by PFC to the promoter which is the government.

The other option on the table is issuance of fresh equity to the government. Both the options will help the government increase its stake in PFC so that the merged entity remains a state-owned company, the official said.

Currently, the government holds 55.99 per cent stake in PFC, and 52.63 per cent in REC. The remaining shareholding in both the companies is with the public. Shares of PFC were trading at Rs 407.95 a piece, while REC shares were trading at Rs 329.05 on BSE on Tuesday.

The merged entity, officials said, would have larger underwriting capacity for big ticket projects and enhanced risk absorption appetite.

It would enhance scope for portfolio diversification in sectors like renewables and transmission and better compete with peers.

The Companies Act stipulates that a ‘government company’ must have at least 51 per cent of its stake held by the central or state government.

As on December 31, 2025, PFC’s consolidated loan asset book was Rs 11.51 lakh crore, while REC’s loan asset book was Rs 5.82 lakh crore.

Under the administrative control of the power ministry, PFC finances projects related to the power sector and holds 20 per cent market share. REC finances power sector projects involved in generation, transmission, distribution, renewable energy, and new technologies.