Astral shares tumbled 10% to ₹1,339.00 following the board's approval of the chemicals business demerger, with the stock declining as much as 9.91% on Monday trading. The sharp fall reflects investor uncertainty about the impact of separating the chemicals business, as reported by Livemint. According to Equirus Securities, the demerger is expected to create a near-term overhang on the stock's performance as investors assess the valuation multiples each standalone business could command post listing. The decline indicates that while the demerger may create operational efficiencies, investors are worried about the strategic implications of splitting the diversified business.
Astral Ltd.'s Board has approved a Composite Scheme of Arrangement involving the demerger of its chemicals business into wholly owned subsidiary Astral Chemie Limited and the amalgamation of Al-Aziz Plastics Private Limited into the existing Astral entity. According to the latest exchange filing, the Board approved the scheme after considering recommendations and reports of the Audit Committee and Committee of Independent Directors. The filing stated that the chemicals business undertaking, along with all related assets and liabilities, will be demerged from Astral Limited and vested into Astral Chemie on a going-concern basis. The amalgamation of Al-Aziz Plastics is subject to approval from the National Company Law Tribunal (Ahmedabad Bench), SEBI, NSE, BSE, and other statutory authorities, as well as approval from respective shareholders and creditors. The demerger process is expected to take 9-12 months to complete, as reported by Motilal Oswal. The demerger ratio is set at 1:1, meaning subject to necessary approvals, Astral shareholders will receive shares of Astral Chemie in proportion to their existing shareholding.
The primary driver behind this demerger is the growing diversification of Astral's chemicals segment, which spans multiple product categories including adhesives, polyvinyl acetate (PVA), cyanoacetylates, solvent cements, silicone sealants, epoxy resins, construction chemicals, putties and allied products. As reported by Business Standard, the reorganisation will consolidate the existing paints and coatings business under a single, dedicated entity. Sandeep Engineer, Managing Director of Astral, stated that "Today marks an important milestone in Astral's journey. Over the years, we have built strong and scalable platforms across plumbing, adhesives, sealants, construction chemicals, paints and coatings, each with its own operating model, capital requirements, market opportunities and strategic priorities." The demerger rationale includes improved management focus across segments, specialisation and targeted growth, efficient capital allocation, value unlocking for shareholders, and more tailored corporate governance with independent board oversight. This separation allows both businesses to operate independently with greater flexibility in deciding capital expenditure, growth investments, and expansion strategies.
The chemicals business generated a revenue of ₹1,266.3 crore in FY26, contributing around 21% of Astral Limited's total turnover of ₹59,076 million. The turnover of the demerged undertaking for the year ended March 31, 2026 stood at ₹12,663 million. Following the demerger, shareholders will receive one share of Astral Chemie for every one share held in the existing entity, with no cash consideration involved. The post-scheme shareholding pattern of Astral Chemie Limited will mirror that of Astral Limited, with promoters holding 54.22% and the public holding 45.78%. Al-Aziz Plastics Private Limited reported a turnover of ₹373 million and net worth of ₹215 million for the same period. According to Livemint, in FY26, Astral's plumbing business reported revenue of ₹46.8 billion and EBITDA of ₹9.2 billion, while its Adhesive + Paint business posted revenues of ₹18.9 billion and EBITDA of ₹1.92 billion. Management has guided for ₹45-50 billion revenue (implying a CAGR of 20-25%) over the next four to five years, with EBITDA margins potentially reaching 14-15% by FY28E. JPMorgan estimates the chemicals business could account for roughly 15% of consolidated profit before tax by FY28.
Equirus Securities maintained its 'Long' rating on Astral shares with a June 2027 target price of ₹1,980 per share, implying an upside potential of over 33% from current levels. The brokerage firm believes the plumbing business will command premium multiples versus listed peers due to industry-leading operating profitability, growth aggression and backward integration into CPVC Resin manufacturing. However, it considers the Adhesive + Paint business valuations challenging, as the business may see strong growth aggression together with focused profitability improvement, but the EV/EBITDA multiple remains difficult to quantify due to business size. ICICI Securities believes the demerger would likely not create operational issues as both verticals have different dynamics and were already run as separate entities. The brokerage values the plumbing business at a multiple comparable to Asian Paints, while the chemicals business is valued at a discount to Pidilite Industries. ICICI Securities maintained a 'Buy' rating and cut the March 2027 target price to ₹1,738 per share from ₹1,805 earlier, estimating the combined enterprise value of both businesses at ₹46,764 crore.
