The shares of Power Finance Corporation (PFC) have gained more than 17% in 2026 so far, while those of REC have declined around 9%, with analysts commenting on whether investors should buy the two stocks as the mega merger process of the two PSU non-banking financial companies marches on.

Earlier in February this year, Union Finance Minister Nirmala Sitharaman after presenting the Union Budget, said that the government will restructure Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) in order to streamline operations. The shares of the two companies had sharply jumped following the announcement.

The Cabinet Committee on Economic Affairs earlier cleared a proposal under which PFC acquired 52.63% of the government’s holding in REC. With this acquisition, PFC and REC are currently operating in a holding subsidiary structure. The proposed merger would consolidate the two entities into a single balance sheet, subject to statutory approvals and detailed structuring.

What should investors do?

Fresh exposure in PFC and REC will be better if staggered than chased after the merger headline, said Harshal Dasani, Business Head at INVasset PMS. He highlighted that the boards of the two companies have cleared the merger proposal, while completion may still depend on regulatory and structural approvals. “That means the trade is no longer only about power financing fundamentals. It is also about swap ratio, timing and execution clarity,” the analyst said.Between the two, PFC offers cleaner visibility because it is the parent entity and is better placed as the consolidation anchor, Dasani said, adding that REC’s underperformance may create a catch-up trade if the swap ratio is favourable, but that is not the same as fundamental comfort. “The core business remains structurally supported by power capex, transmission, renewable financing and improving state utility discipline, but valuations have already priced in a fair amount of that cycle,” he said.

“For fresh money, the prudent approach is to wait for the swap ratio or accumulate only in tranches. PFC looks better suited for conservative exposure. REC is more of a merger-arbitrage call and carries higher event risk. The one thing to avoid is treating the merger as guaranteed upside. In PSU financials, structure can matter as much as earnings,” the analyst further said.

PFC and REC share prices

PFC shares have fallen more than 3% in one week and 9% in one month to close at Rs 429.35 apiece on Wednesday. The stock is overall up nearly 19% in 2026 so far. In the longer term, the shares of the company delivered 6% returns over one year, 226% returns over three years and 362% in five years. The company currently has a market capitalisation of nearly Rs 1.43 lakh crore.

REC shares meanwhile declined over 3% in one week and 12% in one month, closing at Rs 333 apiece on Wednesday. The stock has declined 9% in 2026 so far and 15% in one year. In the longer term, the shares of the company jumped 158% in three years and 217% in five years. The company currently has a market capitalisation of more than Rs 88,210 crore.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

Shares of REC Ltd. rose 1.23 per cent to Rs 525.95 in Thursday’s trade. It hit an intraday high of Rs 535.15 and low of Rs 524.50, respectively, during the day.

The stock quoted a 52-week high price of Rs 653.90 and low of Rs 302.15.

As of 12:08PM (IST), the counter saw total traded volume of 93,542 shares with a traded value of Rs 4.95 crore, according to NSE.

The stock had closed at Rs 532.50 in the previous session.

The scrip has 5.16 per cent in the past one month till date, while the benchmark BSE Sensex has slipped -5.699999809265137 per cent during the same period.

According to exchange data, the stock traded at a price-to-earnings (P/E) multiple of 9.32 while price-to-book ratio stood at 1.73. A higher P/E ratio shows that investors are willing to pay a higher price for per rupee earnings given by the stock because of better future growth expectations. The price-to-book value indicates the inherent value of a company and it reflects the price investors are ready to pay even for no growth in a business. The stock belongs to the Term Lending – Power industry. Promoter/FII Holding
Promoters held 52.63 per cent stake in the company as of 30-Sep-2024, while FII and MF ownership in the firm stood at 21.23 per cent and 8.94 per cent, respectively.

Key Financials
The company reported consolidated sales of Rs 13706.3100 crore for the quarter ended 30-Sep-2024, 4.69 per cent from the previous quarter’s Rs 13092.4400 crore and 17.14 per cent from the year-ago quarter’s Rs 11701.2600 crore. Its net for the latest quarter stood at Rs 4037.72 crore, 6.54 per cent from the same quarter a year ago.

Shares of REC Ltd. slipped 3.22 per cent to Rs 610.0 in Friday’s trade. It hit a high of Rs 630.7 and low of Rs 608.35 during the session.

On the technical charts, the 200-DMA of the stock stood at Rs 496.64, while the 50-DMA was at Rs 600.11. If a stock trades above 50-DMA and 200-DMA, it usually means the immediate trend is upward. On the other hand, if the stock trades below 50-DMA and 200-DMA, it is considered a bearish trend and if trades between these averages, then it suggests the stock can go either way.

The stock traded above the signal line of momentum indicator moving average convergence divergence, or MACD, signalling a bullish bias on the counter. The MACD is known for signalling trend reversal in traded securities or indices. It is the difference between the 26-day and 12-day exponential moving averages. A nine-day exponential moving average, called the signal line, is plotted on top of the MACD to reflect “buy” or “sell” opportunities.

On the other hand, the Relative Strength Index (RSI) of the stock stands at 51.6. Traditionally, a stock is considered overbought when the RSI value is above 70 and oversold when it is below 30.

The return on equity (RoE) for the stock stood at 20.56 per cent while the Return on Capital Employed (RoCE) was at 8.88. RoCE is a financial ratio that determines a company’s profitability and the efficiency of capital use, while the RoE is a measure of profitability of a business in relation to the equity.

Shares of REC Ltd. gained 0.62 per cent to Rs 582.25 in Tuesday’s trade as of 12:02PM (IST).

The stock hit a high price of Rs 582.6 and low of Rs 574.0 during the session.

The return on equity (ROE) for the stock stood at 20.56 per cent. Traded volume on the counter stood at 12:02PM shares and turnover at Rs 6.55 crore around that time.

The stock of REC Ltd. quoted a 52-week high and 52-week low prices of Rs 653.9 and Rs 216.45, respectively.

The Beta value of the counter, which measures its volatility in relation to the broader market, stood at 1.27. Promotor/FII Holding
Promoters held 52.63 per cent stake in the company as of 30-Jun-2024, while overseas investors held 20.43 per cent and domestic institutional investors had 14.66 per cent.

Key Financials
The company reported consolidated sales of Rs 13092.44 crore for the quarter ended 30-Jun-2024, up 3.04 per cent from previous quarter’s Rs 12706.66 crore and up 18.04 per cent from the year-ago quarter’s Rs 11091.77 crore.

Net profit after tax for the latest quarter stood at Rs 3460.19 crore, up 16.58 per cent from the same quarter a year ago.