PFC-REC merger likely to weigh on near-term financial performance

Additional market borrowing to raise funding cost

Apart from the Union power ministry, the Street is also trying to gauge the impact on operational and financial health of Power Finance Corporation and REC (earlier known as Rural Electrification Corporation) if the two were to operate as a single entity.

The proposed deal (merger or acquisition) is part of the central government’s plan to meet its 2018-19 divestment target of Rs 800 billion. The government owns majority stakes in both power financiers. Though not clear if it would be a merger or acquisition, experts believe the former option is unlikely, as this will not fulfil the government’s divestment