Power Finance Corporation (PFC) on Thursday said it has completed the buyout of fellow PSU Rural Electrification Corporation (REC). The next step is to enable synergies and eventually merge the two, according to top company officials.

In December last year, the Cabinet Committee on Economic Affairs had approved the strategic sale of the government’s 52.63 per cent shareholding in REC to PFC, along with transfer of management control.

Responding to a query on whether a merger of the two will be completed in a year, Rajeev Sharma, CMD of PFC, told reporters: “I am quite hopeful.”

Asked if the merger will result in REC being delisted from the bourses, he said: “All those things we have not considered; once the government decides, whatever steps are to be taken will be taken.”

Speaking on the sidelines, another PFC official said: “The merger will happen, that is why we have got management control…But the merged entity will remain a government company with 51 per cent shareholding of the government.”

Acquisition price

The acquisition price of REC works out to ₹139.50 a share, according to an official statement. PFC has acquired 103.94 crore shares held by the government in REC at this price for ₹14,500 crore.

“Now, PFC will be the holding company of REC and also its promoter…PFC has financed this deal majorly, i.e, around 70 per cent from cash inflows from the business and the balance 30 per cent through debt,” the statement said.

“The acquisition...has presented PFC with a significant inorganic growth opportunity, whereby, on a consolidated basis, PFC’s asset book, income, profit etc. would be almost doubled. On the basis of 2017-2018 financials, the consolidated annual income would be about ₹50,000 crore and annual profit would be ₹11,000 crore,” it added.

 

 

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