REC Limited has disclosed the outcome of its Board of Directors meeting held on May 16, 2026. The Board reserved the proposal for the merger of REC into Power Finance Corporation Limited for the approval of the Hon'ble President of India. This decision was taken pursuant to Regulation 30 of SEBI's Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015, and follows the earlier board meeting notice dated May 13, 2026.

Board Decision on REC-PFC Merger

At the meeting, the Board of Directors took key decisions regarding the proposed merger of REC into PFC. The Board authorized the Chairman and Managing Director (CMD) of REC to make an application to, and seek the approval of, the Hon'ble President of India for the proposed merger.

The share exchange ratio will be determined by valuers duly appointed for this purpose. The merger is subject to maintaining the merged entity's status as a 'Government Company', including by way of issuance of necessary securities to, or infusion of capital by, the Central Government, in accordance with applicable law.

Merger Structure and Legal Framework

The proposed merger is being pursued under Sections 230-232 of the Companies Act, 2013. Upon the merger being duly approved under applicable law and made effective, all the assets and liabilities of REC shall be transferred to Power Finance Corporation, and REC shall stand dissolved in accordance with the relevant provisions of the Companies Act, 2013. The merger remains subject to the final approval of the Board of Directors and receipt of all other requisite consents, approvals, and permissions.

Appointment of Chief Compliance Officer

The Board also approved the appointment of Mr. Mohammed Azaz Ali, General Manager (Finance), as Chief Compliance Officer of REC with effect from May 17, 2026. His tenure will extend until the date of his superannuation, which is June 30, 2028, in terms of RBI's Guidelines/Circulars. Mr. Ali holds a Bachelor's degree in Electronics Engineering and a Master's degree in Business Administration (Finance).

The meeting commenced at 4:00 p.m. and concluded at 4:35 p.m. The intimation was signed by Dinesh Garg, Company Secretary & Compliance Officer of REC Limited.

Morgan Stanley has reaffirmed its Overweight rating on Power Finance Corporation , setting a target price of ₹525. The brokerage's stance is anchored in management's FY27 guidance, which points to steady loan book expansion and resilient margins, alongside a significant corporate milestone in the form of the REC merger.

Key Highlights from Morgan Stanley's Assessment

The following table summarizes the key parameters underpinning Morgan Stanley's Overweight call on Power Finance Corporation:

Loan Growth and Spread Outlook

Management's FY27 guidance projects loan growth of 10%, reflecting a measured expansion strategy for the state-owned infrastructure financier. Alongside this, loan spreads are expected to remain stable in the 2.4–2.5% range, indicating consistent net interest margin performance. Morgan Stanley also notes expectations of lower loan churn, which could support the overall quality and predictability of the loan book going forward.

REC Merger on the Horizon

A notable corporate development highlighted in the assessment is the anticipated completion of the REC merger by April 2027. This consolidation is cited as a key structural development for Power Finance Corporation, potentially reshaping the scale and operational profile of the entity post-merger.

Credit Costs and Provision Dynamics

While the overall outlook remains constructive, Morgan Stanley flags that credit costs may normalize after FY26. The brokerage attributes FY26 provision reversals of around ₹18 billion to recoveries and rating upgrades, suggesting that this tailwind may not persist at the same magnitude beyond the fiscal year. Investors are advised to factor in this potential normalization when assessing the company's earnings trajectory.