The union cabinet has given the principle approval to the transfer of government 52.63 percent stake in Rural Electrification Corporation to Power Finance corporation for 15,000 crore. After the transfer of the stake , PFC will have the management control of REC.The Finance minister said that the deal is to be closed by march 31,2019.
A ministerial panel including secretaries is also working out modalities and pricing issues of PFC - REC deal. Following the deal REC will become a subsidiary of PFC.The acquisition is expected to create a larger entity with an enhanced balance sheet and provide a higher value loans as well as remove duplication of work."This was announced in 2017-18,budget that if in one space there are multiple PSUs then their consolidation ,acquisition or merger will happen.In this case, Cabinet approves the acquisition model."
The Deal will help the government scale up its disinvestment proceeds.With this deal, the total disinvestment by the government in this year will reach 55,000 crore,which is around Rs 25,000 crore less than the actual target of Rs 80,000 crore for this fiscal.
Prior to the deal , the government stake in REC was at 57.99 percent and 65.64 percent by PFC by the end of September quarter.However , the government holding in REC had come down to 52.63 percent stake sale through ETF.