Astral shares fell 11% since Monday after the company announced plans to demerge its chemicals business—adhesives, paints, and construction chemicals—into a separately listed entity, Astral Chemie. According to The Economic Times, the fall can be attributed to uncertainty over the standalone valuation and growth prospects of the demerged entity. As per 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 brokerage has set a target price of ₹1,980, noting that valuing the adhesives and paints business will be challenging, particularly in terms of the discount it may trade at versus listed peers. Analysts have reduced target prices by 5-9% following the demerger announcement, with the stock closing Thursday's session at ₹1,364.6 on the BSE.
According to the exchange filing, the Composite Scheme of Arrangement includes Astral Limited (Demerged Company), Astral Chemie Limited (formerly Astral Coatings Private Limited) (Resulting Company), and Al-Aziz Plastics Private Limited (Transferor Company). The separate listing is proposed for the new entity, subject to regulatory and shareholder approvals, which may take at least 9-12 months to complete. Existing Astral shareholders will receive shares of Astral Chemie in a 1:1 ratio with mirror shareholding. The turnover of the demerged undertaking for the year ended March 31, 2026 stood at ₹12,663 million, accounting for 21% of the total turnover of the demerged company for the same period. The amalgamation of Al-Aziz Plastics into Astral Limited, followed by dissolution, is subject to approval from multiple regulatory authorities including the National Company Law Tribunal (Ahmedabad Bench), SEBI, NSE, BSE, and other statutory and regulatory authorities.
Plumbing contributed 71% of FY26 revenue and 87% of total PBIT, while the chemicals business faced significant challenges. According to The Economic Times, the plumbing business has increasingly become Astral's earnings and cash-flow engine with its PBIT rising to ₹686.9 crore in FY26 from ₹605.4 crore in FY24, while the chemicals business PBIT declined to ₹103.4 crore from ₹139.6 crore during the same period. In FY26, the plumbing business contributed around 71% of the total ₹6,569 crore revenue. Chemicals revenue stood at ₹1,900 crore with Ebitda margin less than 10% versus 20% for plumbing. The newly acquired specialty chemicals business through Differentiated and Sustainable Solutions (DSS) will also be housed under Astral Chemie, with DSS expected to generate ₹150 crore in revenue at an Ebitda margin of 20-25% by FY28, while also supporting backward integration in adhesives. The plumbing business is expected to benefit from the upcoming CPVC backward integration, continued product additions, and healthy growth across the faucets and sanitaryware portfolio.
JP Morgan downgraded Astral from 'Overweight' to 'Neutral', arguing that while the demerger allows the mature plumbing business to pursue a more aggressive growth strategy, the chemicals business could struggle without the financial backing of the plumbing segment. CLSA also believes the demerger alone is unlikely to rerate the stock unless the chemicals business demonstrates sustained growth and margin expansion. However, some brokerages remain optimistic that the separation will enable greater strategic focus on chemicals. Motilal Oswal raised its target price by 15% to ₹1,710, while Elara Securities and JM Financial have maintained their 'accumulate' stance. HDFC Securities maintained a 'buy' rating with a target price of ₹1,740, stating that while the creation of a separate entity may lead to some cost increases and potential operational disruptions during the demerger process, the company expects significant revenue growth for the chemicals division. Antique Stock Broking has a buy rating with a target price of ₹1,630, while ICICI Securities maintains a buy rating with a target price of ₹1,738.
Management has guided for ₹4,500-5,000 crore revenue from the chemicals business over the next four to five years, with EBITDA margins potentially reaching 14-15% by FY28E. According to The Economic Times, the company anticipates revenue growth to ₹4,400-5,000 crore over the next four to five years from ₹1,861 crore in FY26, implying an annual growth rate of 19-22%. 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 business is targeting revenue of ₹5,000 crore over the next five years, led primarily by growth in India adhesives, with the Dahej solvent cement plant nearing completion and the newly acquired DSS business expected to contribute revenue of ₹150 crore by FY28. If achieved, Astral Chemie could emerge as India's second-largest listed pure-play chemicals company after Pidilite Industries. The adhesives segment's ROCE is expected to reach 20% over three to four years, while the paints business is expected to turn Ebitda profitable in FY27. Management expects transparency in segment reporting to improve as both businesses will operate as separate entities, with no significant capex required for the two demerged entities in the coming years.
