Power Finance Corporation Ltd.'s Board of Directors has given in-principle approval for a significant restructuring merger with REC Limited, marking a major consolidation move in India's public sector non-banking financial company space. The decision was taken during a board meeting held on February 6, 2026, following a key announcement in the Union Budget 2026-27.

Budget Announcement Triggers Merger Decision

The merger proposal stems from the Finance Minister's announcement on February 1, 2026, under paragraph 43 of the Union Budget 2026-27 speech. The budget statement outlined the government's vision for NBFCs in achieving Viksit Bharat with clear targets for credit disbursement and technology adoption.

The specific announcement stated: "The vision for NBFCs for Viksit Bharat has been outlined with clear targets for credit disbursement and technology adoption. In order to achieve scale and improve efficiency in the Public Sector NBFCs, as a first step, it is proposed to restructure the Power Finance Corporation and Rural Electrification Corporation."

Current Corporate Structure

The merger builds upon the existing relationship between the two entities. PFC currently holds a controlling stake in REC Limited after acquiring 52.63% of the government's holding pursuant to the Cabinet Committee on Economic Affairs (CCEA) approval. This acquisition established PFC and REC as holding and subsidiary companies respectively.

Merger Framework and Compliance

The board has ensured that the proposed merger structure will maintain regulatory compliance and government ownership. Key aspects of the merger framework include:

• The merged entity will continue to remain as a "Government Company" under the Companies Act, 2013
• Compliance with other applicable laws will be maintained
• The restructuring aims to achieve scale and improve efficiency in public sector NBFCs
• Detailed merger scheme development is pending requisite approvals

Next Steps and Timeline

The company has indicated that the detailed merger scheme will be finalized and shared after obtaining necessary approvals from relevant authorities. The board meeting, which commenced at 2:30 p.m. and concluded at 3:58 p.m., addressed this significant corporate restructuring as part of the government's broader strategy for public sector NBFC consolidation.

This merger represents the first step in the government's initiative to restructure public sector NBFCs, potentially setting a precedent for similar consolidations in the sector. The combined entity is expected to leverage synergies and achieve greater operational efficiency in serving India's power and rural electrification financing needs.

Power Finance Corporation Limited announced its unaudited quarterly results for the third quarter and nine months ended December 31, 2025, demonstrating robust financial performance across its core lending operations to power, logistics, and infrastructure sectors.

Board Meeting and Regulatory Compliance

The Board of Directors convened on February 5, 2026, to approve the quarterly financial results under Regulation 33 of SEBI Listing Obligations and Disclosure Requirements Regulations, 2015. The meeting commenced at 11:30 AM and concluded at 1:30 PM, with proceedings scheduled to continue on February 6, 2026.

Financial Performance Highlights

The company reported impressive quarterly results with net profit increasing 14.7% year-on-year to ₹4,763.33 crore in Q3 FY26 compared to ₹4,154.92 crore in the corresponding quarter of the previous year. Total income for the quarter reached ₹14,660.70 crore, marking a substantial increase from ₹13,052.53 crore in Q3 FY25.

Nine-Month Performance

For the nine months ended December 31, 2025, Power Finance Corporation maintained its growth trajectory with net profit rising 12.1% to ₹13,726.77 crore compared to ₹12,243.24 crore in the same period of the previous year. Total income for the nine-month period increased to ₹43,193.74 crore from ₹38,184.08 crore, representing a growth of 13.1%.

Dividend Declaration and Key Dates

The Board of Directors approved a third interim dividend of ₹4.00 per equity share, representing 40% on the face value of ₹10 per share for FY 2025-26. The company had previously paid ₹7.35 as interim dividend for the current financial year.

Fundraising Activities

During the quarter, Power Finance Corporation successfully raised ₹7,986 crore through non-convertible debentures via private placement. The funds were raised through three issuances in November 2025, with all proceeds fully utilized as per the stated objectives without any material deviations.

Asset Quality and Risk Management

The company maintains robust asset quality with a comprehensive Expected Credit Loss framework. As of December 31, 2025, the total loan outstanding stood at ₹5,69,626.94 crore with impairment loss allowance of ₹13,673.14 crore, resulting in an overall coverage ratio of 2.40%.