Astral Shares Drop 11% As Chemicals Demerger Raises Valuation Questions

Shares of Astral Ltd. have fallen 11% since Monday after the company announced plans to separate its chemicals business from its core plumbing operations. The proposed restructuring has sparked concerns among investors over the future valuation and growth prospects of the standalone chemicals business.

On Friday, 3 July, Astral Ltd shares were trading 0.16% lower at ₹1,361.00 at 1:01 PM.

Astral unveiled the demerger plan on 25 June, saying its adhesives, paints and construction chemicals business will be transferred to a newly listed company, Astral Chemie. The existing listed company will continue to house the plumbing business, while shareholders will receive one share of Astral Chemie for every Astral share they own, subject to regulatory approvals.

Why Are Investors Concerned?

Brokerages believe the chemicals business may face challenges in securing a premium valuation because of its smaller scale and relatively weaker financial performance. Analysts say estimating the valuation multiple for the standalone business remains difficult.

The numbers also highlight a widening gap between the two segments. In FY26, the plumbing business contributed around 71% of Astral's ₹6,569 crore revenue. Its profit before interest and tax (PBIT) rose to ₹686.9 crore from ₹605.4 crore in FY24, while the chemicals division's PBIT declined to ₹103.4 crore from ₹139.6 crore.

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What Does The Demerger Mean?

Astral said the separation will allow both businesses to pursue independent growth strategies with dedicated management teams. The chemicals business is targeting revenue of ₹4,400-5,000 crore over the next four to five years, compared with ₹1,861 crore in FY26. The company also plans to publish separate financial statements for both entities with its June quarter FY27 results.