The Board of Directors of Power Finance Corporation (PFC) and REC (REC) approved the Scheme of Merger (Scheme) for the merger of the two state-run power sector non-banking financial companies (NBFCs).
“The Board of Directors of PFC and REC approved the Scheme of Merger (Scheme) for merger of REC (Transferor Company) into PFC (Transferee Company) and their respective shareholders and creditors, under Sections 230 to 232 and other applicable provisions of the Companies Act, 2013,” PFC said in a statement.
Merger to create ₹11 lakh crore power financing entity
The merger of REC into PFC shall create a financing entity with an aggregate loan book of over ₹11 lakh crore, it added.
The merger was approved on Sunday.
Scheme subject to regulatory approvals
“The Scheme is conditional upon and subject to, inter-alia receipt of all requisite approvals and consents required under applicable law including, approvals from the respective shareholders and creditors of both the companies, and all relevant regulatory and governmental authorities,” PFC said.
It will also be conditional upon the Merged Entity continuing to qualify as a ‘Government Company’ under the Companies Act, 2013 and the Government of India continuing to retain majority voting rights and control in the merged entity (directly or indirectly), it added.
Share exchange ratio announced
Pursuant to the Scheme and valuation report, the Share Exchange Ratio for the Proposed Merger of REC into PFC shall be 88 equity shares of PFC of ₹10 each fully paid up for every 100 equity shares of REC of ₹10 each fully paid up to be issued to the shareholders of REC as existing on a record date to be determined by the Boards of PFC and REC (as may be applicable) at a future date.
Advisors appointed for merger process
Deloitte Touche Tohmatsu India is acting as Transaction and Tax Advisor, and Cyril Amarchand Mangaldas as the Legal Advisor, to both PFC and REC.
Further, RBSA Valuation Advisors LLP was appointed by PFC, and Ernst & Young Merchant Banking Services LLP was appointed by REC, to provide joint valuation reports.
SBI Capital Markets was appointed by PFC, and Nuvama Wealth Management was appointed by REC, to provide their respective fairness opinions on the joint valuation reports.