DCM Shriram Locks in 58 MW Renewable Power for Bharuch to reduce Electricity Costs

DCM Shriram, a diversified Indian conglomerate that makes chemicals, sugar, ethanol, and uPVC windows, has signed a definitive agreement with Serentica Renewables India 38 Private Limited to source 58 MW of hybrid renewable power for its energy-intensive chemicals plant in Bharuch, Gujarat. The company will invest up to ₹105 crore to acquire a minimum 26% equity stake in the captive special purpose vehicle, with the project expected to be commissioned by June 2027. The deal, announced on 17 July 2026, will lift DCM Shriram's total renewable energy capacity across its Bharuch and Kota sites to 176 MW (peak), marking a significant step in its strategy to reduce power costs and exposure to conventional energy price swings at its most electricity-hungry business.

The Deal: Captive Structure, Fixed-Price Power

The agreement is structured as a group captive arrangement under the Electricity Act, a model DCM Shriram has used before. Under this framework, the company must hold at least 26% equity in the SPV to qualify for captive generation benefits, which include exemption from certain cross-subsidy surcharges on grid power. The investment of ₹104.4 crore will be made in one or more tranches, and the project will supply approximately 36 MW of round-the-clock renewable power out of the 58 MW peak capacity .

The power will come from a 190 MW hybrid renewable energy project being developed by Serentica Renewables, combining solar power from Rajasthan and wind power from Karnataka. Serentica, backed by a $650 million investment from KKR, has built 3,000 MW of renewable capacity and focuses on providing firm, dispatchable renewable energy to hard-to-abate industries .

Mr. Sabaleel Nandy, Executive Director & CEO of DCM Shriram Chemicals, said the project is expected to help avoid nearly 0.4 million tonnes of CO₂ emissions annually while improving cost efficiency. "Given that power is one of the most significant input costs, this will help improve cost efficiency, provide greater visibility into long-term power costs and reduce exposure to fluctuations in conventional energy prices," he stated .

Why Power Costs Matter: The Chemicals Margin Story

The Bharuch plant is the heart of DCM Shriram's chemicals business, which is India's second-largest chlor-alkali manufacturer with 1 million MTPA of installed capacity. Power is the single largest variable cost in this segment. On the Q3 FY26 earnings call, management disclosed that power accounts for "almost 60%, 70% cost of production" in the PVC business . The sensitivity is clear: when power costs fall, margins expand sharply.

The chemicals segment's financial performance over the last eight quarters illustrates this dynamic. Revenue has grown strongly, but margins have swung with power costs and plant stabilisation expenses:

In Q1 FY26, when power costs were lower due to reduced fuel rates, the chemicals PBDIT margin hit 24.5%. By Q3 FY26, margins compressed sharply as stabilisation costs of new plants—hydrogen peroxide, aluminium chloride, epoxy, and refined glycerine—weighed on profitability, partly offset by lower input prices . For the full year FY26, chemicals PBDIT rose 50% to ₹749.6 crore, with a margin of 19.6% versus 18.0% in FY25 .

Group CFO Amit Agarwal explained the power cost hierarchy plainly on the Q2 FY26 call: "The grid is most expensive followed by coal and then renewable. Renewable is the cheapest, but one has to remember that when we take renewable, we also need to take grid power. So the average has to be looked at" . Locking in fixed-price renewable power through captive SPVs directly addresses this averaging challenge—it replaces a portion of expensive grid power with a cheaper, predictable alternative.

Building the Renewable Portfolio: From 50 MW to 176 MW

The Serentica deal is the latest in a series of renewable energy investments DCM Shriram has announced over the past two years. The company's green power journey at its chemicals sites has progressed in distinct phases:

Bharuch: The plant already had 50 MW (peak) of captive renewable power as of Q1 FY26, when an additional 6.6 MW injection took the total to that level . In March 2026, the board approved a ₹217 crore investment to add another 48 MW (peak) of renewable capacity along with related infrastructure, targeting completion by Q1 FY28. This would take Bharuch's total to approximately 98 MW (peak) . The Serentica deal adds a further 58 MW (peak) on top of that, bringing the Bharuch total to around 156 MW (peak) once all projects are commissioned.

Kota: The company signed a definitive agreement with JSW Renewables for a 68 MW (peak) captive renewable energy project under a group captive structure. This project began injecting an average of 15 MW from May 2026, with full commissioning expected by Q1 FY27 .

Combined: With the Serentica project, total renewable power across both sites will reach 176 MW (peak), up from 50 MW at Bharuch and a partially commissioned 68 MW at Kota as of mid-2026 .

How Much of Bharuch's Power Need Will Renewables Cover?

The Bharuch plant's caustic soda operations alone require approximately 220-225 MW of power. On the Q1 FY26 earnings call, management confirmed that the average renewable draw during that quarter was about 24-25 MW against a total requirement of roughly 220 MW—meaning renewables supplied only about 11% of the plant's power needs at that time . On the Q2 FY26 call, the same 225 MW requirement was cited, with renewables contributing around 25 MW .

The 58 MW Serentica project, combined with the 48 MW board-approved expansion, would dramatically increase the renewable share. If the plant's total power demand remains around 225 MW, the combined 156 MW of peak renewable capacity at Bharuch (50 MW existing + 48 MW approved + 58 MW Serentica) could theoretically cover a large portion of the load, though the intermittent nature of solar and wind means the actual average supply will be lower than peak capacity. The Serentica project alone is designed to deliver approximately 36 MW of round-the-clock power .

Capex Context: Where the ₹105 Crore Fits

The ₹104.4 crore equity investment in the Serentica SPV is incremental to the company's already-announced renewable capex. On the Q4 FY26 earnings call in May 2026, Group CFO Amit Agarwal guided total capex for FY27 at "around ₹1,000-₹1,200 crore including the normal capex as of now, which has been let us say approved by the board, but we have few projects in the pipeline as well" .

The board had already approved ₹217 crore for the 48 MW Bharuch renewable expansion (₹87 crore equity plus ₹130 crore infrastructure) . Other projects under implementation include a Fenesta aluminium extrusion plant at Kota, a 100 TPD aluminium chloride plant, a 225 TPD calcium chloride plant, a salt works acquisition of approximately ₹175 crore, and a 36 KTPA formulated resins capacity expansion .

The company's net debt stood at ₹2,506 crore as of 31 March 2026, up from ₹1,788 crore a year earlier, reflecting the heavy capex cycle of recent years. Management has indicated that the major investment phase in chemicals is nearing completion. Vikram Shriram noted on the Q3 FY26 call: "As our major investments in the chemical segment are nearing completion, our strong balance sheet and healthy cash flows position us well to explore value-chain opportunities aligning with our core businesses" . The Serentica investment, at ₹105 crore, is a relatively modest outlay within this framework.

The Sustainability Angle: Emissions and ESG-Linked Financing

The renewable energy push is tied to a formal emissions reduction target. Chairman Ajay Shriram stated on the Q4 FY26 call that the company has "institutionalized a bold pledge to achieve a 40% reduction in our Scope 1 and Scope 2 emissions by 2040" . The Serentica project alone is expected to help avoid nearly 0.4 million tonnes of CO₂ emissions annually .

In March 2026, DCM Shriram raised funds through sustainability-linked non-convertible debentures from the International Finance Corporation (IFC). Management described this as "global validation of our ESG roadmap" and "a significant step for DCM Shriram in integrating sustainability into our capital structure and aligning the company's financial outcomes with measurable sustainability targets" . The renewable energy investments directly support the key performance indicators tied to such sustainability-linked instruments.

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Sources

1 Press Release is attached herewith on update on Renewable Power Supply Agreement
2 Earnings-call transcript, Jan 2026
3 Investor presentation, 2026-05-13
4 Earnings-call transcript, Nov 2025
5 Earnings-call transcript, Jul 2025
6 Earnings-call transcript, 2026-05-21
7 Investor presentation, Jan 2026
8 BSE/NSE EOD prices & index levels