REC Ltd is set to become a subsidiary of Power Finance Corp. Ltd (PFC). The big question now is: Will investors continue to see a spark in the stock or prefer to go short? REC’s stock has been on an electrifying run since its acquisition by PFC was announced. The stock gained 49.3% since 1 December 2018, compared to a 5.4% increase in the Nifty 500 index.
At first, it was a relief rally, because reports that REC would be the one using its cash to acquire PFC came unfounded. But now, relief seems to have turned into exuberance.
The corporation will continue as a public sector entity, and its borrowing costs will be similar. Analysts are ruling out much synergy with no major benefits accruing in operating costs. Besides, while REC could merge with PFC in the long run, that may not garner much benefit.
