PFC-REC Mega Deal

Question: Incorporated on July 16th, 1986, Power Finance Corporation Ltd. is?
(a) Navaratna CPSE
(b) Maharatna CPSE
(c) Non-Banking Financial Corporation
(d) Both (a) and (c)
Answer: (d)
Related facts:

  • State-Owned power sector Financier Power Financier Corporation (PFC) completed its Mega Deal to buy majority stake in Rural Electrification Corporation Limited (REC Ltd.) on 28th March, 2019.
  • PFC paid Rs 14,500 crore to the Government to buy a 52.63% stake in REC.
  • This deal helped the Government exceed its disinvestment target of Rs. 80,000 crore for the FY 2018-19.

Benefits:

  • The PFC-REC merger deal, to be completed by next year, can potentially help in faster resolving of power sector NPAs.
  • PFC has financed 70 % of the deal through cash inflows from the business and the balance 30 % is via debt instruments.
  • PFCs asset book, income and profit would be nearly doubled.
  • Post the deal, the company’s consolidated annual income would be about Rs. 50,000 crore and annual profit about Rs. 11,000 crore.
  • Merger would make PFC India’s second largest state-owned financial firm by market capitalization after SBI.
  • PFCs strategic importance to the Government will further increase upon completion of the acquisition as the combined entity will become the biggest non-bank finance entity in which the government holds a controlling stake.

Links:
https://www.businesstoday.in/current/corporate/pfc-completes-rec-acquisition-pays-rs-14500-crore-to-government/story/331910.html
https://economictimes.indiatimes.com/industry/banking/finance/pfc-completes-rec-acquisition-hopeful-of-merger-in-2019-20/articleshow/68617026.cms?from=mdr

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