The Power Finance Corporation Ltd (PFC) on Friday approved the in-principle merger of the company with Rural Electrification Corporation Ltd (REC). The decision comes after PFC acquired 52.63 per cent of the government’s holding in REC, making the company a subsidiary of PFC.
The merger follows the announcement made by the Finance Minister on February 1 under paragraph 43 of the Union Budget 2026-27 speech.
The Budget had outlined a vision for developing the non-banking financial sector with clear targets for credit disbursement and technology adoption. It had proposed restructuring public sector NBFCs to achieve scale and improve efficiency, suggesting the merger of PFC and REC as a first step.
PFC said that post-merger, it will continue to remain a “Government Company” under the Companies Act, 2013, and other applicable laws.
The detailed merger scheme will be shared after obtaining the necessary approvals. The merger is expected to strengthen the operations of both entities and align with the government’s vision for developing the NBFC sector.
PFC Q3 FY26 Results
PFC reported a nearly six per cent rise in consolidated net profit to Rs 8,211.90 crore for the quarter ended December, aided by higher income. The company had posted Rs 7,759.56 crore in the year-ago period from continuing and discontinued operations.
Total income rose by about nine per cent to Rs 29,140.57 crore in the third quarter from Rs 26,821.84 crore in the corresponding period last year.
For the April-December period, PFC’s profit after tax increased 13 per cent to Rs 25,028 crore from Rs 22,157 crore in FY25. The company’s consolidated loan book stood at Rs 11,51,407 crore as of December 2025, higher from Rs 10,69,436 crore at the end of 2024.
Standalone Performance and Dividend
On a standalone basis, PFC’s net profit rose 15 per cent to Rs 4,763 crore in Q3 FY26, from Rs 4,155 crore in Q3 FY25. The standalone loan asset book grew 13 per cent to Rs 5,69,627 crore as of December 2025 from Rs 5,03,824 crore a year earlier.
PFC Chairman and Managing Director Parminder Chopra said, “The company has delivered a robust performance in nine months, recording double-digit loan asset growth of 13 per cent year-on-year, with the renewable energy book growing by 28 per cent. The Board has declared an interim dividend of Rs 4 per share for the quarter.”
REC Reports Marginal Dip in Profit
REC Ltd reported a marginal decline of 0.58 per cent in consolidated net profit to Rs 4,052.44 crore in the December quarter of FY26, mainly due to higher expenses. The company had posted Rs 4,076.35 crore in the year-ago period ended December 2024.
Total expenses rose to Rs 9,903.89 crore in the reporting quarter from Rs 9,105.94 crore a year ago, while total income increased to Rs 15,058.60 crore from Rs 14,286.91 crore.
The board approved the third interim dividend at 46 per cent (Rs 4.601 per equity share of face value Rs 10 each) for FY26. The record date for dividend payment is February 6, and the payment will be made on or before February 27.
Economic Survey on PSU Disinvestment
The Economic Survey 2025-26, presented by Finance Minister Nirmala Sitharaman in Parliament, had noted that strategic disinvestment in central public sector enterprises has progressed in a calibrated manner.
Since 2016, in-principle approval has been granted for strategic disinvestment in 36 CPSEs, of which 13 transactions have been completed, while the rest are at various stages of implementation.
The survey highlighted that governance reforms have empowered CPSE boards to undertake closure, merger, or disinvestment of subsidiaries, strengthening operational efficiency and corporate governance.
It also suggested that the selective reduction of government equity in certain CPSEs could further strengthen receipts from equity monetisation.
Proposed Amendments and PSU Structure
Currently, about 30 per cent of listed CPSEs have government shareholding below 60 per cent, limiting further disinvestment through offer-for-sale under existing Companies Act provisions. The survey proposed that the definition of “Government Company” could be amended for listed entities, allowing them to retain special resolution rights while enabling selective monetisation.
Alternatively, phased offer-for-sale could continue below 51 per cent or towards full exit without changing the legal definition of a government company. PFC, under the Ministry of Power, is a leading public sector NBFC, while REC is a key state-owned entity in the power sector.
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