Primo Chemicals to Invest ₹21 Crore in 50 MW Solar SPV for Significant Cost Savings

Primo Chemicals will invest ₹21 crore in a Special Purpose Vehicle (SPV) to own and operate a 50 MW solar power plant, projecting annual cost savings of up to ₹24 crore.

This move shows a strategic shift towards renewable energy to lower operating costs.

Project Approval Details

Primo Chemicals Limited's board of directors has approved the incorporation of a Special Purpose Vehicle (SPV), TPCS Private Limited. This SPV is being established to own and operate a 50 MW solar power plant.

The company plans to invest ₹21 crore to acquire a 26% equity stake in this SPV. The project will be developed under a captive mode on an Operational Expenditure (OPEX) model.

Upon commissioning, Primo Chemicals anticipates annual cost savings of up to ₹24 crore, a substantial amount compared to its recent quarterly revenue of ₹140.14 crore. This investment signals a strategic move toward renewable energy to lower operating expenses.

Why This Matters

This investment in captive solar power is a direct attempt to reduce Primo Chemicals' high power costs, which are a large part of its material expenses.

By generating its own electricity from a renewable source, the company aims for greater energy security and cost predictability, protecting itself from fluctuating grid electricity prices. This also aligns with growing ESG (Environmental, Social, and Governance) mandates.

Company's Power Strategy

Primo Chemicals, formerly known as Punjab Alkalies & Chemicals Ltd., has a history of focusing on operational efficiency.

The company previously commissioned a 35 MW captive power plant to enhance its operations. This new solar venture marks another step in using captive power generation.

What Changes Now

• Reduced Operating Costs: Shareholders can expect a potential reduction in the company's energy expenditure, boosting profitability once the plant is operational.
• Energy Independence: The company will gain more control over its power supply, mitigating risks associated with grid reliability and tariff volatility.
• Sustainability Push: Primo Chemicals strengthens its commitment to renewable energy, enhancing its ESG profile.
• Strategic Investment: A direct investment in renewable assets signals a proactive approach to long-term cost management and operational stability.

Risks to Watch

The acquisition and operation of the solar plant are subject to compliance with the Electricity Act, 2003, and related rules, particularly concerning captive power generation and open access in Punjab.

Peer Comparison

Several Indian chemical and pharmaceutical companies are adopting similar strategies to secure renewable energy.

Navin Fluorine International Limited is investing in an SPV for a 6.60 MW captive hybrid wind & solar power project, taking a 26% stake.

Jubilant Pharmova Limited's subsidiaries have also acquired stakes in SPVs for captive renewable power, aiming to reduce costs and carbon footprints.

Key Financial Metrics

• As of March 31, 2025, Primo Chemicals reported revenue of ₹576 crore for the financial year, with a 1-year revenue growth rate of 38%. (FY24–FY25, Standalone, Aggregator)
• The company reported a net profit of -₹0.34 crore for the quarter ended December 2025. (Q3 FY26, Standalone, Aggregator)

What to Track Next

• Power Purchase Agreement (PPA): Execution of the PPA with the SPV will define the terms of power supply and tariffs.
• Shareholder Agreements: The finalisation of the Share Subscription and Shareholders Agreement will cement the investment structure and governance of the SPV.
• Project Commissioning Timeline: Investors will track the progress and scheduled commissioning date of the 50 MW solar plant.
• Actual Cost Savings: Monitor the realised annual cost savings post-commissioning against the projected ₹24 crore.
• Regulatory Approvals: Ensure all necessary approvals under Punjab's electricity laws are secured smoothly.