Astral share price slipped nearly 10% on Monday after the company approved the demerger of its chemicals business. Astral shares declined as much as 9.91% to ₹1,339.00 apiece on the BSE.
Astral Ltd is primarily engaged in two principal business verticals – Plumbing Business, comprising pipes, fittings, water tanks, faucets and sanitaryware, and Chemicals Business, comprising adhesives, sealants, construction chemicals, and other chemical and chemical based products.
Astral Demerger Details
Astral announced that its Board of Directors approved to demerge its chemicals business into a separately listed company. The board also cleared a proposal for merging its 100% subsidiary Al-Aziz Plastics into Astral Ltd.
According to the composite scheme of arrangement, all the plumbing-related businesses – pipes and fittings, bathware and CPVC resin – shall stay with Astral Ltd; while chemicals businesses like India adhesives, Seal IT (UK) along with its subsidiaries, paints and DSS LLP would be transferred to Astral Chemie Ltd.
“In order to enable better administrative control and focused management of each vertical, the board of directors have worked out a composite Scheme which provides for the demerger of its Adhesive Business from Astral Limited into Astral Chemie Limited; and the amalgamation of Al-Aziz Plastics Private Limited with Astral Limited,” the company said in a regulatory filing on June 25.
Astral demerger ratio is set at 1:1. This means subject to the necessary approvals, Astral shareholders will receive shares of Astral Chemie in proportion to their existing shareholding (in ratio of 1:1).
Astral demerger record date is yet to be announced.
“The proposed reorganisation is fast growth-enabling corporate restructuring. This reorganisation is proposed with a long-term perspective to create two stronger and more agile businesses, each equipped to pursue their own growth opportunities, allocate capital with greater discipline and build leadership in its respective markets,” said Sandeep Engineer – Managing Director of Astral Limited.
Should you buy or sell Astral shares?
In FY26, Astral’s plumbing business reported revenue of ₹46.8 billion and EBITDA of ₹9.2 billion. Its Adhesive + Paint business posted revenues of ₹18.9 billion and EBITDA of ₹1.92 billion.
The company’s management has guided for an ROIC of 20% for Pipes business over the next 2 years which will eventually go up to 25%. Adhesives division is expected to generate an ROIC of ~15-17%, which may eventually go up to 20% over the next 3-4 years.
Equirus Securities believes that Astral demerger will create a near term overhang on stock’s performance as investors try to gauge what multiples each individual business will command post listing.
“Plumbing business will command premium multiples versus listed peers due to industry leading operating profitability, growth aggression and backward integration into CPVC Resin manufacturing,” said the brokerage firm.
However, it believes the Adhesive + Paint business valuations will be the tricky part, as how much discount it gets versus listed peers is difficult to comprehend because on one hand, the business will see strong growth aggression together with focused profitability improvement drive (incl. backward integration via DSS acquisition) but on the other hand, at what EV/EBITDA multiple will the business trade at due to business’s size is difficult to quantify.
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 its Thursday’s closing price.
ICICI Securities believes the Astral demerger would likely not create much issues operationally, as both verticals have different dynamics and were already run as separate entities.
The brokerage firm values Astral using the Sum-of-the-Parts (SoTP) methodology, assigning separate valuations to its plumbing and chemicals businesses before arriving at a consolidated target price.
ICICI Securities estimates Astral’s plumbing business to generate EBITDA of ₹1,139.1 crore by March 2028 and values it at 30 times EV/EBITDA, resulting in an enterprise value of ₹34,172.9 crore. The chemicals business is projected to deliver an EBITDA of ₹363.8 crore and is also valued at 30x EV/EBITDA, translating into an enterprise value of ₹10,913.6 crore.
The combined enterprise value of both businesses works out to ₹45,086.5 crore. ICICI Securities then adds Astral’s estimated net cash of ₹1,677.5 crore by FY28, taking the total equity value to ₹46,764 crore. Dividing this by the estimated 26.9 crore outstanding shares results in a target price of ₹1,738 per share.
The brokerage said it values the plumbing business at a multiple comparable to Asian Paints, while the chemicals business is valued at a discount to Pidilite Industries, which it considers the closest listed peer.
ICICI Securities tweaked its estimates, and remained constructive on Astral. It maintained a ‘Buy’ rating on the and cut March 2027 Astral share price target to ₹1,738 apiece from ₹1,805 earlier.
At 1:00 PM, Astral share price was trading 8.56% lower at ₹1,359.00 apiece on the BSE.
