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Astral falls 7% on chemicals business demerger announcement; time to buy? | Markets News



Astral Ltd shares fell 7 per cent on Monday after the company announced a major restructuring of its existing business. The stock opened 4.7 per cent lower at ₹1,417 on the National Stock Exchange (NSE) and slipped to an intraday low of ₹1,385 in morning deals.

 

As of 9:50 AM, the stock was down 6.2 per cent at ₹1,394. In comparison, the Nifty 50 index was up 0.15 per cent.

 

Astral demerger  
Astral demerger: Notably, the company informed the exchanges that its board has approved a scheme to demerge its chemicals business into a separately listed company. Besides, the board has also cleared a proposal for merging Al-Aziz Plastics into Astral Ltd.  “Approved the Composite Scheme of Arrangement amongst Astral Limited (“Demerged Company”/“Transferee Company), Astral Chemie Limited (Formerly known as Astral Coatings Private Limited) (“Resulting Company”) and Al-Aziz Plastics Private Limited (“Transferor Company”) and their respective shareholders and creditors…,” the company said in a fling. 

The scheme provides for “demerger and transfer of the chemicals business undertaking along-with all its related assets and liabilities of Astral Limited (the demerged company) and vesting of the same with and into Astral Chemie Limited (formerly known as Astral Coatings Pvt Ltd) (the resulting company), on a going concern basis.” Under the scheme, shareholders will get one share of Astral Chemie (₹1 face value) for every Astral share held.  The scheme also provides for “amalgamation of Al-Aziz Plastics Pvt Ltd (the transferor company) into and with Astral Limited (the transferee company) and subsequent dissolution of the Transferor Company.” 
Astral stock: Should you buy? 
According to Equirus Securities, the demerger will create a near-term overhang on the stock’s performance as investors try to gauge what multiples each individual business will command post listing. The brokerage has recommended a ‘Long’ rating on the stock for a target price of ₹1,980. The target implies an upside of 33 per cent from the previous close of ₹1,487.

  Equirus said that the plumbing business is likely to command a premium valuation versus the listed peers due to industry leading operating profitability, growth aggression and backward integration into CPVC Resin manufacturing. However, it said that the valuation of the adhesives and paints business remains uncertain as investors assess its growth trajectory and profitability after the implementation of the scheme. 


In FY26, total adhesive + paint business revenues/ Ebitda stood at ₹18.9 billion/ ₹1.92 billion. Within this, India’s adhesive business revenues/ Ebitda stood at ₹12.63 billion/ ₹1.91 billion, UK business revenues/ Ebitda stood at ₹3.85 billion/ ₹150 million, while paints business revenues/ Ebitda stood at ₹2.4 billion/ ₹(140 million). 

 

 


The brokerage noted that management believes the adhesive business has reached a level wherein it will be able to chart its own growth trajectory and fund its growth plans via own balance sheet and without the support from the plumbing business. 

 


Main reasons for demerger as per management are: 

 


1) Improved management focus on each segment

 


2) Specialisation and targeted growth

 


3) Focused capital deployment

 

4) Unlocking of shareholder and credit value and customised corporate governance and independent board oversight 


Astral restructuring to sharpen operational focus  
Antique has maintained ‘Buy’ rating on Astral for a target price of ₹1,630, based on a PE multiple of 50x FY28 EPS (5-year high/ average/low of 119x/ 79x/49x).

 


The brokerage said that the restructuring will transform Astral from a diversified building materials company into two focused, independently managed businesses with distinct growth strategies and capital allocation priorities. The demerger of the chemicals business into a separately listed entity, alongside the consolidation of Al-Aziz Plastics within the core Plumbing business, is expected to sharpen operational focus and enhance strategic flexibility across both verticals.

 


“We believe the proposed restructuring should lead to sharper business focus and has the potential to unlock shareholder value over the medium to long term,” the brokerage said. 

 


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Disclaimer: View and outlook shared belong to the respective brokerages/analysts and are not endorsed by Business Standard. Readers’ discretion is advised.

 
 



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