The Power Finance Corporation is likely to dip into its finances and buy out the government’s stake in Rural Electrification Corporation at a premium. This will bail out the Centre in meeting the divestment target of Rs 80,000 crore for the current fiscal.

The board of PFC is slated to meet next week to decide on the strategic buyout of a 52.63 per cent government stake in REC at a premium.

Officials have indicated that the government could insist on a 20 per cent premium, which could fetch Rs 12,000-Rs 15,000 crore to the exchequer.

Data showed that PFC at the end of the last fiscal had reserves and surplus of Rs 37,220.59 crore.

However, sources pointed out that the deal could face a hurdle if REC was not able to obtain the consent of at least 50 per cent of the foreign lenders for the acquisition by PFC.

REC’s cumulative foreign debt stands at around $1.85 billion, which will mature in phases till 2028, and the state-owned company has begun the exercise of obtaining the consent of these lenders.

While raising funds from the foreign and domestic markets, REC has given an undertaking to the lenders that it would continue to be a PSU with at least 51 per cent government stake.

“For the deal to go through, at least 50 per cent of the lenders will have to give their consent,” officials said.

As the nature of the company will change after the acquisition, REC would be required to intimate to the lenders and obtain their prior consent. After the acquisition, REC would become a subsidiary of PFC.

REC has appointed Barclays Bank, Citigroup Global Markets, HSBC and Standard Chartered Bank as consent solicitation agents.

The board of PFC would also have to take a call on the status of the firm if the foreign lenders oppose the proposal to make REC a subsidiary.

The PFC board has called an extraordinary general meeting of the shareholders on March 19 to approve the takeover.

The agenda includes authorising the board to negotiate and finalise the share purchase agreement and fixing the price, quantum, premium and the terms of payment for the merger.