Govt mulling options to retain 51% stake in PFC post-merger with REC: Official

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 (PFC) post its merger with Rural Electrification Corporation (REC), a senior official said.

Finance Minister Nirmala Sitharaman had, in the FY27 Budget, announced the restructuring of PFC and 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 the Government stake in the merged entity does not fall below 51 per cent,” the official said.

As per the 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 the issuance of preference shares by PFC to the promoter, which is the Government. The other option on the table is the issuance of fresh equity to the Government. Both options will help the government increase its stake in PFC so that the merged entity remains a State-owned company, the official told PTI. Currently, the Government holds 55.99 per cent stake in PFC, and 52.63 per cent in REC.

The remaining shareholding in both companies is with the public. Shares of PFC were trading at INR 407.95 a piece, while REC shares were trading at INR 329.05 on the BSE on Tuesday.

The merged entity, officials said, would have a larger underwriting capacity for big-ticket projects and enhanced risk absorption appetite. It would enhance the 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 of December 31, 2025, PFC’s consolidated loan asset book was INR 11.51 lakh crore, while REC’s loan asset book was INR 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.