Can Tenneco Clean Air India’s IPO deliver long term gains for investors?

ET Intelligence Group: Tenneco Clean Air India, an auto components company, plans to raise ₹3,600 crore through an offer for sale. The promoter group’s stake will fall to 74.8% after the IPO from 97.3%. It is a subsidiary of the US based Tenneco Inc, which designs and manufactures clean air and powertrain products for automotive applications. Tenneco India has two divisions-clean air solutions and shock absorbers. More than 60% of its revenue comes from top five customers, given the nature of business. The company is net cash positive and commands leadership in its area of operation. However, it relies on the parent group for use of brands and patented designs and technical know-how for which it pays royalty, which may keep fluctuating. In addition, revenue has grown in single digits in the past two years. Given these factors, investors with high-risk appetite may consider it for the long-term.

Business
Incorporated in 2018, Tenneco India provides advanced exhaust and after-treatment systems, helping vehicle manufacturers meet the stringent emission norms. It also manufactures shock absorbers, struts and advanced suspension systems under the Monroe brand. As of June 2025, it has 12 manufacturing facilities, comprising seven clean air & powertrain solutions facilities and five advanced ride technology facilities. It also operates two R&D technical centres in India. Its customers include Ashok Leyland, Bajaj Auto, Hyundai Motor India, Mahindra & Mahindra, Maruti Suzuki India, Renault Nissan Automotive India and Tata Motors.

It is the largest supplier of Clean Air Solutions to Indian commercial trucks and off highway segments excluding tractors, with a market share of 57% and 68% respectively. The company is also the largest supplier of shock absorbers and struts to Indian passenger vehicles (PV), with a market share of 52%.

Financials
The company’s revenue rose to ₹4,890.4 crore in FY25 from ₹4,827.4 crore in FY23. Value added revenue (excluding passthrough sales) rose annually by 6% to ₹4,380.1 crore and net profit jumped 20.5% to ₹553.1 crore between FY23 and FY25. Operating margin before depreciation and amortisation (Ebitda margin) improved to 16.7% in FY25 from 11.8% in FY23 compared with 10-28% for its peers. Royalty expense as a percentage of revenue fell to 2.3% in FY25 from 4.7% in FY24. Return on capital employed (ROCE) increased to 56.8% in FY25 from 33.5% in FY23.

Valuation
The company demands a price-earnings multiple of 29, compared with 18-86 for peers including SKF India, Sona BLW Precision Forging and Gabriel India.