Restructuring to drive capital discipline
About the stock: Astral, established in 1996 by Sandeep Engineer, introduced CPVC piping in India. As of FY26, it has 21 manufacturing units with an aggregate capacity of 5.97 lakh TPA (4.2 lakh TPA Pipes, Water tanks & Bathware, 1.4 lakh TPA Adhesives & Sealants, 36000 TPA Paints). It has a strong network of over 2.7 lakh dealers and 3990+ distributors.
Demerger of chemical business: Astral, at its board meet held on June 25, 2026, considered and approved the composite scheme of arrangement, wherein 1) its chemical business undertaking would be demerged and transferred to Astral Chemie and 2) Al-Aziz plastics would be amalgamated into Astral. Resultantly, post the restructuring Astral Limited would house its plumbing business (pipes, fittings, water tanks, bathware) and Astral Chemie would house chemical business (adhesive, paint, speciality chemicals). Pursuant to the scheme, every shareholder of Astral would receive one equity share of Astral Chemie in the ratio of 1:1.
Investment Rationale
• Astral Chemie to eye ~2.5x+ revenue growth over 4-5 years: Astral’s chemical business generated ₹ 1861 crore topline and ₹ 192 crore EBITDA (10.3% margin) in FY26. The management eyes ₹ 2300-2400 crore revenue and 14-15% EBITDA margin by FY28. Over the next 4-5 years, Astral Chemie is targeting to achieve ₹ 4500-5000 crore revenues, which would be led by adhesives India business (~68% of FY26 chemical revenues, 24% CAGR revenue growth over FY22-FY26 with average EBITDA margins of 15-16%) along with newly acquired DSS (₹ 150 crore topline estimated in FY28 to be scaled to ₹ 400-500 crore with EBITDA margins of 20-25%). For paints, it is targeting EBITDA breakeven in FY27 and improvement in margins to high single to low double digit EBITDA margins in FY28.
• Key salient features behind the restructuring: The key rationale behind the restructuring, is to provide clarity regarding the performance, growth prospects and future potential of each vertical independently. It underscores entity-wise management’s focus on maintaining higher capital discipline (each business to chart its own growth trajectory based on its own cash flow generation capability). The scheme eliminates any conglomerate discount and allows capital markets to distinctively value each independent vertical with a choice of ownership. It would be providing individual P&L and B/S of both entities post Q1FY27 results while the complete restructuring process is expected to complete by FY27 end.
Rating and Target Price
• Post restructuring announcement, Astral has corrected by ~8%, which is likely on account of fears assigned to the scale up of chemical business (especially paints & low margin UK adhesives) post restructuring, as it has been benefitting from strong cash flow generation from piping business.
• We retain our BUY rating with a revised Target price of ₹ 1830 as we move to SOTP based valuation methodology from consolidated business valuation.
