Power Finance set to acquire REC for Rs. 14,500 crore

Power Finance Corporation (PFC) signed a share purchase agreement for the acquisition of 103.94 crore shares of Rural Electrification Corporation (REC) which constitutes 52.63 per cent of the paid-up share capital from the President of India. The acquisition is set to take place at a cash consideration of Rs. 139.50 per share with the total cost of acquisition coming to Rs. 14,500 crore. REC’s closing price on March 19, 2019, was Rs. 148.40 per share.

PFC and REC are both public sector undertakings (PSUs) and they have combined revenues of Rs. 50,000 crore. This acquisition is an important step towards the consolidation of PSUs.

PFC believes the acquisition would lead to improved efficiencies in lending processes and policies across both institutions and culminate in public value creation by offering better loan products to the power sector. Convergence of these two entities would benefit the power sector due to the decentralized outreach of REC and professional project finance expertise of PFC. Also, the diversified group assets and portfolio risk would aid in the resolution of stressed power assets of the group in a better manner.

On Friday, PFC was trading at Rs. 114.45 per share, up 0.35 per cent  on the BSE.