Approval of Merger Scheme for REC into PFC by Boards of Directors
Power Finance Corporation Limited and REC Limited approve a merger scheme that could create a much larger government-owned lending institution for India’s power sector.
- The two boards approved a Scheme of Merger that proposes REC’s merger into PFC under the Companies Act, 2013.
- The merged company must remain a Government Company and Government of India control must continue, directly or indirectly.
- The scheme fixes 88 equity shares of PFC for every 100 equity shares of REC, subject to a future record date.
Power Finance Corporation Limited (PFC) and REC Limited (REC) have approved a Scheme of Merger under Sections 230 to 232 of the Companies Act, 2013. The proposal is for REC, the transferor company, to merge into PFC, the transferee company. If completed, the merger would consolidate two major public-sector financiers into a single lending institution for India’s power sector.
What happened
The two Boards of Directors approved the merger scheme along with arrangements for shareholders and creditors. The merged entity is projected to have an aggregate loan book of over INR 11 lakh crore, making it a very large government-linked financing entity in the infrastructure-credit space.
UPSC can ask about the legal basis of a scheme of merger under the Companies Act, 2013, the implications of consolidation in public-sector financial institutions, and the policy trade-off between scale and governance control in infrastructure financing.
