Govt considers REC-PFC merger to bridge budget gap ahead of polls


Govt considers REC-PFC merger to bridge budget gap ahead of polls

India is considering a proposal to combine two state-run lenders to utilities, REC and Power Finance Corp, according to people familiar with the discussions, as it seeks to raise funds to bridge a budget gap.

The first phase of the deal will see REC acquiring a majority stake in Power Finance valued at $2.5 billion possibly by the year ending March 2019, the people said, asking not to be named as the talks aren’t public. Subsequently, the plan is to merge the subsidiary with REC, a departure from the original plan to keep their operations separate. Power Finance had a market value of 268.8 billion rupees ($3.8 billion) on Tuesday.

Prime Minister Narendra Modi’s government is seeking ways to narrow the country’s budget deficit to help finance public welfare projects ahead of elections.

The sale of stake in Power Finance mirrors a similar deal earlier this year, when state explorer Oil & Natural Gas Corp. bought a controlling stake in refiner Hindustan Petroleum Corp. Read More

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