PFC–REC Merger Buzz Lifts Stocks, Govt May Retain Control Without 51% Voting Rights Using Preference Shares

Mumbai: Shares of Power Finance Corporation (PFC) and REC Limited saw strong movement in the market. Around 2 PM, PFC stock was up nearly 1 percent at about Rs 410, while REC shares also gained around 1 percent to trade near Rs 330. The rise came after reports of a possible merger between the two companies.

Government’s New Strategy

According to sources from the Finance Ministry, the government is exploring a new approach for the merger. If PFC and REC combine, the government may not need to hold 51 percent voting rights to retain control of the merged company.

Instead, the government is likely to use preference shares. This means it can maintain 51 percent of the paid-up capital without having the same level of voting rights. This is seen as a smart way to keep control while allowing more flexibility in the company’s structure.

Why Preference Shares Matter?

Preference shares give financial ownership but limited voting power. By using this route, the government can continue to influence decisions and keep control without directly holding a majority of voting shares.

This approach also avoids major changes in equity structure, which can sometimes create uncertainty among investors.

Positive Signal For Investors

Usually, merger news creates confusion in the market. However, in this case, the clarity around government control has improved investor confidence. Market experts believe this is a positive development.

Impact On Power Sector

PFC and REC are both key lenders to India’s power sector. If the merger goes ahead, it could lead to stronger balance sheets and better funding capacity. This may help support large power projects more efficiently.

The merger could also bring consolidation in the sector, making the combined entity more powerful and competitive.

For now, investors are closely watching further updates. If more details about the merger emerge, these stocks could see more movement in the coming days.