The Central Government is formulating a dedicated ownership and voting framework for the proposed merger of Power Finance Corporation (PFC) and REC Limited. Under the proposed arrangement, the government's ordinary equity shareholding in the consolidated financial entity could decline to approximately 36.96 percent. Despite this reduction in standard equity holding, the Centre aims to retain a 51 percent voting majority in the merged company through special voting instruments. As outlined in the Union Budget 2026, REC will be absorbed into PFC once all necessary corporate and regulatory approvals are completed.
Dual Share Structure to Safeguard Majority Voting Control
The primary focus of the proposed arrangement is to maintain operational and strategic control over the state-run lender even if the direct government equity holding drops below the majority threshold. Officials are examining a combination of Superior Voting Rights (SVR) shares alongside preference shares to achieve this governance structure. Unlike standard equity shares that operate on a strict one-share-one-vote principle, superior voting shares confer enhanced voting potency to their holders.
Under the structure being evaluated, each SVR share would carry 10 voting rights. This voting leverage would enable the government to retain decisive authority over major shareholder resolutions, strategic corporate actions, and board appointments, even with an ordinary shareholding below 50 percent. When a company merges by absorbing another entity, issuing new equity to incoming shareholders typically dilutes the parent shareholder's ownership percentage and voting power. The proposed SVR structure directly addresses this dilution effect.
Issuance Details of SVR Shares and Redeemable Preference Shares
The blueprint under consideration includes the issuance of approximately 7 crore Superior Voting Rights (SVR) shares at a premium price. Additionally, the government plans to issue around 63 crore Redeemable Preference Shares (RPS) having a face value of Rs 10 per share. By employing these specialized equity and preference instruments, the Centre ensures long-term management continuity without needing to lock up majority funds in ordinary equity capital.
Share Swap Ratio and Approval Status
The transaction is structured entirely as an equity swap, eliminating any direct cash payout to investors. According to the approved share swap ratio, REC shareholders will receive 88 shares of PFC for every 100 shares of REC held on the designated record date. The official record date for the transaction has not yet been announced. The board of directors at both PFC and REC formally cleared the merger scheme and the swap ratio in June.
Market Performance and Trading Figures of PFC Shares
Following updates surrounding the merger structure, shares of PFC witnessed selling pressure on the stock exchanges. On the National Stock Exchange (NSE) on Thursday, PFC stock was trading at Rs 354.15, marking a decline of 2.73 percent or Rs 9.95 during the session. The stock had opened at Rs 361.75, reached an intraday high of Rs 362.30, and touched an intraday low of Rs 352.35.
