Tenneco Clean Air
IPO Size: Rs. 3,600 Cr, Entirely Offer for Sale (OFS)
- By US-based promoter and privately-held Tenneco (100% stake to drop to 78%)
Price band: Rs. 378-397 per share
M cap: Rs. 16,023 cr, implying 22% dilution
IPO Date: Wed 12th Nov to Fri 14th Nov 2025, Listing Wed 19th Nov 2025
Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.
Auto Component Company
Tenneco Clean Air manufactures engine and chassis components having 12 plants in India and sold to passenger vehicles, commercial vehicles, off-highway and industrial OEMs, with top 10 customers accounting for 80% of revenue. Exports account for barely 5% of topline.
Engine-specific ICE Products
Topline is split equally between 2 divisions:
- Clean air products like exhaust pipes, particulate filters, mufflers, catalytic converters and Powertrain solutions like engine bearings, sealing systems, ignition products
- Shock absorber, strut and Suspension solutions
These products find application in both internal combustion engines (ICE) and electric vehicle (EV), but engine products like exhaust pipes, ignition products are not required in EVs, leading to risk of topline de-growth. This is already visible in FY25 topline, when clean air and powertrain division revenue declined 4% YoY, even as company’s net revenue (excluding customer pass-through) rose 3% YoY. Over the medium term, on rising EV penetration, revenue de-grow is a real risk.
Low Growth, but Margins Expand
FY25 net revenue stood at Rs. 4,380 cr, with Q1FY26 net revenue up 8% YoY to Rs. 1,167 cr, in line with growth of domestic auto industry.
Due to focus on cost rationalisation, after global parent went private in Nov 2022, net margin expanded from 8% in FY23 to 11% in FY25 and to 13% in Q1FY26. PAT stood at Rs. 552 cr for FY25 and at Rs. 168 cr for Q1FY26. However, there is seasonality in profitability, as Rs. 150 cr Q1FY25 PAT did not annualize (FY25 PAT Rs. 552 cr). EPS stood at Rs. 4.2 for Q1FY26, and at Rs. 13.7 for FY25.
Payments to Parent
Company pays Rs. 110 cr or 2.5% of net revenue as annual royalty to parent. Its
total net profit in past 3.25 years, between FY22 to Q1FY26, was at Rs. 1,518 cr. Cumulatively, Rs. 1,693 cr dividend was paid to parent, owned by PE major Apollo Global Management, during this period. Nearly half of this, or Rs. 865 cr, was paid just before IPO (i.e. after 1st July 2025). Why strip-off the company of accumulated profits just before going public?
Dividend and OFS combined would net nearly Rs. 5,300 cr to the global parent, more than company’s annual topline. It seems like the entire world wants a piece of India and its money! And note that this outflow excludes Rs. 507 cr royalty payment, which, some may consider as substitute to R&D expenses.
Fully-Priced IPO
Mcap of Rs. 16,000 cr implies a PE multiple of about 26x, on FY26E EPS of Rs. 15.5. While double digit net margins is a positive and Q2FY26E may witness revenue uptick, company’s product profile is exposed to ICEs and will be adversely affected by advent of electric vehicles.
Also, listed group company Federal-Mogul, selling piston and piston rings (to ICEs, not used in EVs), with Rs. 3,000 cr m cap is ruling at a PE of barely 16-17x, despite Rs. 1,800 cr topline and 10% net margin, indicating low discounting for group and ICE-exposed auto component players.
13th Nov 2025 at 11:35 am
12th Nov 2025 at 04:42 pm