PFC, REC spike up as Cabinet approves sale of REC

The Union Cabinet has given in principle approval for the strategic sale of 52.63 per cent government stake in REC Limited (REC) to Power Finance Corporation Limited (PFC). The deal also involves the transfer of management control to PFC.

In a statement to all stakeholders, PFC stated that the government plans to close the transaction by the end of FY19. The statement said that the definitive pricing for the acquisition has not yet been finalized.

The company ruled out concerns about being placed under credit watch by rating agencies, saying that this was due to the uncertainty revolving around the pricing and the structure of the PFC and REC deal. It believes that the agencies will review its rating post the completion of the deal.

On the question of whether the two companies will merger, PFC said that a decision regarding the merger will be taken in consultation with the Minister of Power in due course of time. The deal will help the government achieve its divestment target and improve its balance sheet by reducing fiscal deficit. Through this transaction, the government will be able to rake up around Rs. 14,000 to 15,000 crore for its controlling stake in REC. 

At 2:47 hours, the stock of PFC was quoting Rs. 102.20 per share, up by 2.25 per cent, while REC was at Rs. 118.35 per share, up by 2.51 per cent on BSE.