IPO Note : Tenneco Clean Air India Ltd by Geojit Financial Services Ltd
Positioned to Capture Next-Gen Auto Opportunities
Tenneco Clean Air India Ltd. (TCAIL), part of the U.S.-headquartered Tenneco Group, is a global Tier-I automotive component supplier. TCAIL operates two key verticals—Clean Air & Powertrain Solutions (~57.5% of FY25 revenue) and Advanced Ride Technologies (~42.5%). Tenneco is the largest supplier of shock absorbers and struts to Indian passenger vehicle (PV) OEMs with a 52% revenue share and the leading provider of clean air solutions to Indian commercial truck OEMs and Off-Highway (OH) OEMs (ex-Tractors) with a market share of 57% and 68%, respectively. Its customers include M&M, Tata Motors, Ashok Leyland, Maruti Suzuki, Daimler India CV, John Deere, and Toyota Kirloskar Motor. By FY25, the company operated 12 manufacturing plants across 7 states and 1 union territory—7 focused on Clean Air & Powertrain and 5 on Advanced Ride Technology.
* India’s auto component industry expanded at a CAGR of 13.4%, rising from Rs.4,592 billion in FY20 to Rs.8,622 billion in FY25. The market is expected to reach Rs.13,500–14,500 billion by FY30, supported by steady economic growth and robust demand across OEM, replacement, and export segments (Source: CRISIL).
* Despite a largely flat revenue, TCAIL reported a substantial improvement in profitability, with PAT rising to Rs.553cr in FY25 from Rs.377cr in FY23, driven by operational efficiencies and prudent cost management.
* The company has maintained consistent profitability with expanding margins—EBITDA margin improved from 11.2% in FY24 to 16.7% in FY25 and further to 17.8% in Q1FY26, supported by a favourable product mix and increasing premium SUV adoption.
* TCAIL reports a robust ROE of 42.7% and ROCE of 54%, underscoring efficient capital utilization and strong cash generation. Its negative net debt positions the company well to undertake technology-led capex and localization initiatives without straining the balance sheet.
* The company leverages Tenneco Group’s extensive portfolio of over 5,000 active patents and 7,500 trademarks (as of June 2025) to deliver innovation-led solutions for Indian OEMs. It also operates two R&D technical centers in India, focused on developing products tailored to local market needs.
* In FY25, capacity utilization stood at 54.8% for cold-end products (mufflers and exhaust pipes), 80.6% for hot-end products (catalytic converters), and 83.0% for the Advanced Ride Technologies division, reflecting healthy operational levels and ample headroom for growth without significant capacity expansion.
* Stricter emission and efficiency standards—BS7, CAFE, CPCB IV+, and TREM V—are expected to drive demand for advanced after-treatment and catalytic solutions, positioning TCAIL for continued wallet-share growth across CV, off-highway, and industrial segments.
* At the upper price band of Rs.397, TCAIL is valued at 29x FY25 P/E, which appears reasonable relative to peers. Supported by strong parentage, market leadership in clean-air and ride performance systems, established OEM partnerships, robust financials, and healthy return ratios, the company is well-positioned to capitalize on structural tailwinds in India’s auto sector, including premiumization and tightening emission norms. Hence, we recommend a ‘Subscribe’ rating for the long term.
Purpose of IPO.
The offer consists entirely of an Offer for Sale (OFS) amounting to Rs.3,600cr. The purpose of the issue is to achieve the benefits of listing the company’s equity shares on the stock exchanges.
Key Risks
* High customer concentration risk: ~80% of sales come from the top 10 clients.
* Risk from electrification and technology shifts: Transition to new technologies could impact existing product demand.
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SEBI Registration Number: INH200000345
