Primo Chemicals Limited to Acquire 26% Stake in 50 MW Captive Solar Project to Offset Rising Power Costs

Primo Chemicals Limited (PCL) is aggressively pivoting its energy strategy, moving to solar to protect operating margins from volatile grid pricing and high energy intensity. The company’s Board of Directors has approved a definitive investment of ₹210 million (₹21 Crore) to acquire a 26% equity stake in TPCS Private Limited, a Special Purpose Vehicle (SPV) established to develop a renewable energy asset. The transaction facilitates the procurement of power under a captive operating expenditure (OPEX) model, utilizing a 49.998 MW AC (50 MW) solar project designed to supply PCL’s primary manufacturing facility in Naya Nangal, Punjab.

Transaction Structure and Financial Terms

The investment involves the acquisition of 2,100,000 equity shares in TPCS Private Limited at a face value of ₹100 per share. This cash consideration will be deployed in one or more tranches to meet the 26% equity threshold required for captive status. To formalize the delivery and ownership mechanics, PCL is executing a Power Purchase Agreement (PPA) and a Share Subscription and Shareholders’ Agreement (SSHA).

The SPV, incorporated on February 13, 2026, is currently promoted by Arpa Infrastructure Developers Private Limited (51% stake) and Sun Photonics Private Limited (49% stake). Under the terms of the SSHA, PCL’s shares will rank pari-passu with the promoter group concerning dividends, distributions, and liquidation proceeds. Additionally, the company has secured a “Right of First Refusal” (ROFR) regarding any future transfer of stakes by the promoter group.

Strategic Rationale: Transitioning to a Hybrid Energy Mix

PCL’s shift toward solar energy is a critical necessity given its high energy-intensive production process. For FY26, power costs represented over 41% of the company’s total revenue, reaching ₹232.41 crore (gross of incentives). While the company successfully reduced finance costs by 19.6% through active debt repayment during the same period, a 6.2% rise in power costs has continued to suppress operating margins.

This solar initiative does not replace but rather complements PCL’s existing energy infrastructure. The company currently operates a 35 MW captive coal-based power plant at Naya Nangal, supported by a 10-year coal supply agreement with Coal India. By integrating 50 MW of solar capacity, PCL is moving toward a hybrid captive model. This diversification is expected to yield annual savings of up to ₹240 million (₹24 Crore) upon full commissioning, providing a material re-rating catalyst for the company’s financial profile. These savings have the potential to more than double the company’s current standalone profit base (FY26 Standalone PAT: ₹10.56 crore).

Regulatory Framework and Captive Status

The acquisition of a 26% stake is legally mandated to satisfy the requirements of the Electricity Act, 2003, and the Electricity Rules, 2005. To maintain “captive” status and qualify for associated financial benefits, PCL must adhere to two primary regulatory thresholds:

1. Ownership: The consumer must hold a minimum of 26% of the equity share capital in the generating entity.
2. Consumption: The captive owner must consume at least 51% of the energy generated by the plant on an annual basis.

Achieving this status allows PCL to bypass the standard third-party procurement model and utilize the “Open Access” framework. This is strategically advantageous as it grants exemptions from the Cross-Subsidy Surcharge (CSS) and Additional Surcharge (AS) typically levied by Distribution Companies (DISCOMs). PCL has initiated the process for necessary regulatory approvals within the State of Punjab, where localized grid constraints and banking rules govern the economic viability of power evacuation.

Entity Profiles and Compliance Disclosures

Target SPV: TPCS Private Limited Incorporated on February 13, 2026 (CIN: U35105HR2026PTC141869), the entity is dedicated to the generation and transmission of renewable energy. As of the current filing, the pre-transaction shareholding is split between Arpa Infrastructure Developers (51%) and Sun Photonics (49%).

Regulatory Compliance PCL has confirmed that the investment is a non-related party transaction and complies with the disclosure requirements of Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. No promoters or promoter groups of PCL have any interest in the target SPV.

About Primo Chemicals Limited Formerly known as Punjab Alkalies & Chemicals Limited (renamed in December 2022), the company is the largest producer of Caustic Soda in North India. Operating from its flagship facility at Naya Nangal, Punjab, the company maintains an annual Caustic Soda capacity of 165,000 tonnes. Its product portfolio, which includes Hydrochloric Acid and Liquid Chlorine, serves as a core supplier to the textile, detergent, and pharmaceutical sectors.

Executive Summary Table

Official Source Citations

• Official Disclosure – National Stock Exchange of India (NSE): Primo Chemicals Limited SEBI Regulation 30 Filing regarding Investment in Special Purpose Vehicle (SPV) for 50 MW Solar Power Plant, dated May 05, 2026.
• CARE Ratings – Credit Rating Report: Primo Chemicals Limited Facilities/Instruments Rating Rationale and Credit Assessment, dated July 28, 2025.
• Tata Power – Official Corporate Analysis: “Is group captive solar the edge businesses need today?” (Industry report on captive solar regulations in India), May 20, 2026.
• Energy Transition Preparedness Initiative (ETPI) – Sector Study: “Learnings from Electricity Sector Study” (Collaborative report by Prayas Energy Group and WRI India), April 16, 2024.