New Delhi, June 29 -- Demergers are usually cheered by the markets, but Astral's wasn't. Its stock fell over 8% on Monday after the company announced plans to hive off its chemicals business-adhesives and paints-into a separately listed entity, Astral Chemie. Astral will become a pure-play plumbing and building materials company, with shareholders receiving one Astral Chemie share for every Astral share.

The demerger does not answer the question weighing on investors' minds: can Astral's premium valuation be justified despite the persistent strain in its chemicals business? Despite falling 11% over the past five years, the stock still trades at 52 times its estimated FY27 earnings, per Bloomberg consensus.

Plumbing contributed 71% of FY...