Following the approval of a Scheme of Merger by the Board of Directors of Power Finance Corporation Limited (PFC) and REC Limited (REC) in accordance with the provisions of the Companies Act, 2013, a new public sector financing institution focused on power and infrastructure will be established in India.
As per the planned plan, REC and PFC will combine to form a new finance institution with a combined loan book of more than ₹11 lakh crore. A stronger financial position, more efficient operations, and better capacity to meet India’s fast expanding power and infrastructure needs are all goals of the merger.
A number of entities must give their stamp of approval before the merger can take effect. These include the respective shareholders and creditors of the two companies, as well as the appropriate regulatory bodies and the Indian government. An essential stipulation of the plan is that the combined entity must maintain its status as a Government Company as defined by the Companies Act, 2013, with the Indian government maintaining control, majority ownership, and voting rights.
According to the joint valuation assessment, the authorised share exchange ratio states that for every 100 fully paid-up equity shares of REC, REC shareholders will receive 88 equity shares of PFC, each with a face value of ₹10. Both companies’ boards will declare the record date for selecting eligible shareholders later on.
The deal will be overseen by a number of prominent legal firms. Both companies have Cyril Amarchand Mangaldas as their legal advisor and Deloitte Touche Tohmatsu India LLP as their transaction and tax advisor.
In order to compile the joint value reports, PFC and REC have selected RBSA value Advisors LLP and Ernst & Young Merchant Banking Services LLP, respectively. For PFC, SBI Capital Markets offered a fairness opinion on the value, and for REC, Nuvama Wealth Management did the same.
Merging the two entities should strengthen the public sector bank, making it better prepared to back renewable energy projects, large-scale infrastructure investments, power infrastructure growth, and India’s energy transformation.
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