PFC and REC shares traded lower in early deals on Monday after the state-run lenders approved their long-awaited merger scheme to create a power sector financing giant with a combined loan book of over Rs 11 lakh crore. PFC shares were down 1.83% at Rs 424.75, while REC declined 0.32% to Rs 363.50.

In separate late-night exchange filings on June 28, both companies said their respective boards had approved the Scheme of Merger under Sections 230 to 232 of the Companies Act, 2013, under which REC will merge into PFC.

Under the approved scheme, REC shareholders will receive 88 equity shares of PFC for every 100 equity shares of REC held. The share exchange will be applicable to shareholders on a record date that will be announced later by the boards of the two companies.

The merger remains subject to multiple statutory and regulatory approvals, including approvals from shareholders, creditors and relevant government authorities. The companies also said the scheme is conditional upon the merged entity continuing to qualify as a government company under the Companies Act, with the Government of India retaining majority voting rights and control.

PFC and REC said the merger will create a larger financing entity with an aggregate loan book exceeding Rs 11 lakh crore, aimed at strengthening scale and operational efficiency.

Deloitte Touche Tohmatsu India LLP is acting as the transaction and tax advisor, while Cyril Amarchand Mangaldas has been appointed as the legal advisor for both companies. RBSA Valuation Advisors LLP and Ernst & Young Merchant Banking Services LLP prepared the joint valuation reports, while SBI Capital Markets and Nuvama Wealth Management provided fairness opinions for PFC and REC, respectively.

The board approval comes months after Finance Minister Nirmala Sitharaman, in the Union Budget 2026, announced plans to restructure the two state-owned power financiers to improve efficiency and create greater scale.

Earlier, Moneycontrol had reported that the merger is targeted to be completed by April 1, 2027, subject to approvals from the Department of Investment and Public Asset Management (DIPAM).

According to an indicative implementation roadmap reviewed by Moneycontrol, the draft merger scheme was to be finalised in June, followed by approvals from the boards and shareholders, with regulatory clearances expected by early 2027 and the merger becoming effective from April 1, 2027.