Govt mulling options to retain 51% stake in merged PFC-REC entity: Official

New Delhi

The government is looking at options, including issuance of preference shares or fresh equity, to maintain 51% stake in the state-owned Power Finance Corporation (PFC) post its merger with REC, a senior official said.

“The government would like to retain a majority stake in the merged entity as it would be the largest government-owned NBFC with strategic presence. Discussions are going on over the options to ensure that government stake in the merged entity does not fall below 51%,” the official said.

As per the Companies Act, a “government company” is one in which not less than 51% of the paid-up share capital is held by the Central government, or by any state government, and includes a company that is a subsidiary of such a government company. One of the options being discussed is the issuance of preference shares by the power finance corporation to the promoter, which is the government. The other option is the issuance of fresh equity to the government. Both options will help the government increase its stake so that the merged entity remains a state-owned company.