Birla buys a renewable firm from Shell for $1.8 billion

**Akshara** (0:04)
In today's episode, we'll break down two important stories. First, we'll talk about Aditya Birla taking a piece of Shell's renewable business. And then we'll talk about what iron ore really costs. Welcome back to The Daily Brief by Zerodha, where we cut through the noise to help you understand what's actually happening in the most important stories from business and markets. I'm your host Akshara, and today is Thursday, 16th July. Coming to the first story.
So Aditya Birla Renewables, a subsidiary of Drasim Industries, made headlines recently for acquiring a renewable company from Shell for Rs 17,200 crore or approximately $1.8 billion.
Obviously, this sounds like a really big deal. But before touching that number, if you're wondering when Birla entered the renewable space, we did too. Turns out, they've been in this sector for quite some time, having silently built up a portfolio of roughly 4.4 gigawatts of capacity. However, perhaps one reason their Renewables division hasn't made all that noise is because, up until now, they essentially acted as an internal utility provider. They set up wind and solar farms almost entirely to run their own sister companies. Their Ultratech Cement Plants and Hindalco Aluminium Smelters are power guzzlers. So it probably only made sense to build captive power capacity for them. On the other side of the equation, Shell has been trying to get rid of spring energy for a while now. So technically, what Birla is buying is Sol Energy Power, a Mauritius registered holding company that owns the spring energy group of companies.
But what matters is what sits inside it, a portfolio of 5 gigawatts. About 3.3 gigawatts of that is already operational and generating power, while another 1.7 gigawatts is under construction. So when you add spring's 5 gigawatts to Birla's existing 4.4, you get a combined portfolio of around 9.3 gigawatts. The deal flips Aditya Birla Renewables from a business that mostly built solar and wind farms to power the group's own factories into one of India's larger commercial power producers, selling bulk electricity to the state grid under long-term contracts. And they aren't stopping there. The group had set itself a 10 gigawatt target, which this single deal nearly completes ahead of schedule. So Chairman Kumar Mangalam Birla laid out where they go next. Now we come to that $1.8 billion headline figure.
So what's funny is that just four years ago, Shell bought Spring for roughly $1.55 billion or approximately Rs. 12,000 crore. Back then, it only had 2.1 gigawatts up and running. Over the next four years, Shell burned capital to build that up to 3.3 gigawatts. And when you add the construction bill to the original purchase price, Shell's total spend likely comes close to the $1.8 billion it's getting today and may even cross it. Essentially, after four years of holding this business, Shell is walking away roughly flat, maybe worse. But probably to them, selling the business at that price seems like a better option than holding it any longer. The party that actually made money here was Actis, a private equity firm that built Spring from scratch starting 2017
They acquired the land, fought the red tape, won the contract, and then sold the finished business to Shell. So why would Shell sell when everyone's getting in on this space? Because Shell in 2026 is a very different company from Shell in 2022 And to understand what changed, you have to remember what 2020 to 2022 felt like for oil companies.
For one, the pandemic had crushed oil demand so badly that US crude prices briefly went negative. There was lots of doubt on how quickly these prices would recover. In general, over the past decade, there were signs that oil prices would continue to remain low because the world structurally faced a glut of oil.
And this, as we've covered before, reduced the pricing power that OPEC countries had over oil, and likely even depressed the profits of conventional oil firms like Shell. But secondly, and more existentially, trillions of dollars were flowing into ESG funds, and money managers wanted their oil stocks to show a plan for a post-oil world. The pressure wasn't just from markets either. In May 2021, a Dutch court ordered Shell to cut its emissions 45% by 2030 And in the same month, a tiny activist fund called Engine No. 1 managed to win 3 board seats at ExxonMobil on a climate platform. So the message to every oil major was clear.
Show us your green future, or we'll force one on you.
So they all moved at once. BP promised to cut oil production. Total went as far as renaming itself Total Energies, and it was at the peak of this ESG wave that Shell bought the business from Actis because it was the fastest possible way to look green.