Astral Ltd. shares experienced a significant drop, falling 8% on Monday, following the announcement of a strategic demerger. The company revealed plans to separate its chemicals business, encompassing adhesives, paints, and specialty chemicals, into a distinct entity.
Post-demerger, Astral Ltd. will retain its core plumbing-related operations, including pipes, fittings, bathware, and CPVC resin manufacturing. The newly formed entity, Astral Chemie, will manage the demerged chemicals segment.
Analyst Views on Demerger Impact
Financial analysts largely view the demerger as a potential near-term overhang for Astral's stock. Equirus Securities noted that investors would need time to determine appropriate valuation multiples for each newly independent segment. JM Financial echoed this sentiment, suggesting that post-demerger valuation and price discovery would likely favor the higher-margin plumbing business.
Equirus highlighted that the plumbing business is likely to command a premium multiple due to its industry-leading operating profitability, aggressive growth strategies, and backward integration into CPVC resin. Valuing the adhesives and paints business, however, presents a trickier challenge, as its discount against listed peers remains uncertain despite strong growth and profitability drives.
Brokerage Ratings and Target Prices
- JM Financial maintained an 'ADD' rating with a target price of Rs 1,600 for the stock.
- Elara valued Astral Chemie at Rs 10,000 crore and the plumbing business at Rs 33,200 crore, reiterating an 'Accumulate' rating with a target of Rs 1,660.
- MOFSL reiterated a 'Buy' rating but adjusted its target to Rs 1,710, acknowledging the stock's 15% correction from its March 2026 high.
- ICICI Securities retained a 'BUY' rating, revising its target to Rs 1,738, believing the demerger will enable stronger growth for both businesses and enhance disclosures.
The demerger is expected to allow both Astral Ltd. and Astral Chemie to pursue growth initiatives with enhanced focus and more efficient capital deployment. Shareholders of Astral Ltd. are slated to receive shares of Astral Chemie in a 1:1 ratio, with completion anticipated by the end of FY27. Mr. Sandeep Engineer, the current CMD, will continue to lead both companies.