IPO Overview
Tenneco Clean Air India, established in 2018 as a subsidiary of US-based Tenneco Inc., is planning to raise ₹3,600 crore through an offer for sale. This
strategic move will reduce the stake of the promoter group to 74.8% from the previous 97.3%. The company's primary operations involve providing advanced exhaust and after-treatment systems, as well as manufacturing shock absorbers, struts, and advanced suspension systems, primarily under the Monroe brand. Tenneco India has 12 manufacturing facilities spread across India. These include seven facilities focused on clean air and powertrain solutions and five dedicated to advanced ride technology. The company also operates two R&D technical centers. The key customers of the company include major automotive manufacturers like Ashok Leyland, Bajaj Auto, Hyundai Motor India, and others.
Market Leadership Position
Tenneco Clean Air India holds a strong position in the Indian market. It is the largest supplier of Clean Air Solutions to the Indian commercial truck and off-highway segments, excluding tractors. The company commands a substantial market share of 57% and 68% respectively in these segments. In addition to clean air solutions, the firm is the largest supplier of shock absorbers and struts to Indian passenger vehicles (PVs), holding a market share of 52%. This dominance underscores its strong presence and capabilities in the automotive component market, allowing it to provide critical components to major vehicle manufacturers across the nation. This leadership also suggests a high degree of confidence from the customers in its products.
Financial Performance Analysis
Over the financial years, Tenneco Clean Air India has demonstrated significant improvements in its financial metrics. The revenue of the company increased to ₹4,890.4 crore in FY25 from ₹4,827.4 crore in FY23. Its value-added revenue, excluding pass-through sales, rose by 6% annually, reaching ₹4,380.1 crore. Net profit experienced a substantial jump of 20.5%, reaching ₹553.1 crore between FY23 and FY25. The operating margin before depreciation and amortization (Ebitda margin) improved to 16.7% in FY25 from 11.8% in FY23, a significant increase when compared with the 10-28% range of its peers. Furthermore, the royalty expense as a percentage of revenue decreased to 2.3% in FY25 from 4.7% in FY24, reflecting an improvement in cost structure. The return on capital employed (ROCE) also showed a significant increase, rising to 56.8% in FY25 from 33.5% in FY23, indicating efficient utilization of capital.
Key Considerations
Despite strong market position and financial performance, there are important factors that investors should consider before investing in the IPO. The company heavily relies on its parent group for brands, patented designs, and technical know-how, paying royalties for their use, which may fluctuate. Single-digit revenue growth in the recent past is also a point of concern. The company is demanding a price-earnings multiple of 29, which is higher than the range of 18-86 of its peers including SKF India, Sona BLW Precision Forging and Gabriel India. Given the single-digit revenue growth and the higher valuation compared to peers, investors with a high-risk appetite are advised to consider the IPO for the long term.
