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Technology at the core, growth at scale!

Tenneco Clean Air (TENNIND) holds leading positions across Clean Air and suspension, with ~58% share in CV Clean Air, ~68% in off-highway Clean Air (extractors), ~20% in PV Clean Air and ~55% in PV shock absorbers/struts. Deep OEM integration and access to Tenneco’s global technology and IP create strong entry barriers. Growth should be driven by premiumization, BS-VII, CAFE III and TREM-V, alongside localization of advanced products, new customer programs and India’s emergence as an export hub. With a capital-efficient model, strong balance sheet and multiple avenues for market- and wallet-share gains, we see scope for sustained earnings growth. We initiate coverage with a BUY rating and TP of INR673, based on 30x Sept-2028E earnings.

Strong competitive advantage from global parentage

* TENNIND’s key competitive advantage stems from its integration with the global Tenneco network, giving it access to advanced technologies, global OEM relationships, R&D capabilities, and manufacturing expertise. The company is deeply embedded in customers' product development cycles through customized, performance-critical solutions, creating high switching costs and long-term partnerships.

* The company’s strong localization and innovation capabilities, combined with access to the parent’s future mobility technologies and intellectual property, position it well to benefit from stricter emission norms, vehicle premiumization, and evolving powertrain trends.

India emerging as a strategic exports hub

* TENNIND is emerging as a strategic export and manufacturing hub within the global Tenneco network, leveraging India's cost competitiveness, engineering capabilities, and global quality manufacturing standards.

* With Indian products now nearing global technology parity, the company is expanding exports of clean-air and advanced ride-control systems to developed markets. Growth is expected to be driven by higher export penetration, direct OEM wins, localization-led cost advantages, and expansion into adjacent product categories.

Suspensions - DaVinci & CVSAe capture India’s premiumization wave

* TENNIND has ~55% market share in India’s PV suspension market, built through deep OEM integration, technology leadership, and backward integration, with an industry-leading share-of-business at key customers including MSIL, M&M, and TMPV. This leadership is now being extended through DaVinci DCx and CVSAe. DaVinci, commercialized with M&M in Feb’26, offers ~85–90% of the comfort of a semi-active system at a significantly lower cost, and we believe it can be adopted in the INR1.0–3.5m segment (~70% of PVs). We expect the suspension business to post ~20% CAGR over FY26-FY29, aided by DaVinci’s expansion toward the mass-premium segment, rising semi-active penetration, exports, and higher share-of-business.

Clean Air – Riding the next wave of tighter emission norms

* TENNIND is India’s leading clean air player, with ~58% share in CVs, ~68% in offhighway applications excluding tractors, and ~20% in PVs, positioning it well for the next regulatory cycle. CVs should benefit from BS-VII/CSFC-led content growth, with LCVs providing additional share-gain potential given Tenneco’s relatively low current presence. Tractors offer the largest whitespace opportunity, with the 30–50HP segment accounting for ~90% of volumes and TREM-V potentially adding INR5,000–7,000 of CPV as after-treatment penetration expands, supported by Tenneco’s relationships with Mahindra and John Deere. In PVs, BS-VII and CAFE III could drive ~1.3x CPV, led by GDI-driven GPF adoption, partly offsetting declining ICE volumes; the Japanese OEM GPF nomination from 2028 further strengthens its hot-end positioning. We estimate Clean Air & Powertrain revenue to grow ~17% CAGR over FY26–29, with margins broadly stable, aided by an INR124b order book as of Mar’26, providing >100% coverage of FY28 revenue targets.

Robust financials support growth

* TENNIND maintains a strong balance sheet with a net cash position, enabling growth investments without leverage. The business benefits from a negative working capital cycle and strong return ratios (90%+ core RoCE), driven by efficient capital deployment. Cash flow conversion remains healthy (net CFO/EBITDA 70%+, FCF/PAT 80%+). Overall, the company’s financial profile provides resilience across cycles while supporting expansion into new segments.

Valuation & view

* TENNIND enters its next phase of growth from a position of strength, commanding ~58% share in CV Clean Air, ~68% in off-highway Clean Air (extractors), ~20% in PV Clean Air, and ~55% in PV shock absorbers and struts. These leadership positions, backed by deep OEM relationships and Tenneco’s global technology and R&D, create strong entry barriers. We see multiple growth levers ahead as premiumization raises suspension content, while BS-VII, CAFE III, and TREM-V drive higher Clean Air content across PVs, CVs, and offhighway applications. Localization of advanced technologies, new customer programs, and India’s emergence as an export hub should further support market- and wallet-share gains. We estimate a 19% earnings CAGR for the consolidated business (FY26-FY29E).

* With a capital-efficient model and strong balance sheet, TENNIND is well placed to pursue growth while sustaining healthy returns. Its net cash position, negative working capital cycle, 90%+ core RoCE, and strong cash conversion (70%+ CFO/EBITDA; 80%+ FCF/PAT) provide resilience and support expansion into new segments. At the CMP of INR506, the stock trades at 26.1x/19.9x FY28E/29E EPS. We initiate coverage on the stock with a BUY rating and a TP of INR673 based on 30x Sep’28E earnings.

* Key risks:

1) Faster EV adoption

2) termination of the technology license or PE exit overhang

3) intensifying competition

4) commodity fluctuations

5) loss of key customers.

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