Bookrunners include JM Financial, Citigroup, Axis Capital and HSBC, and the registrar is MUFG Intime. As many 12 broker notes say the issue is sensibly priced versus peers and backed by improving profitability, cash flows and return ratios, supporting a “subscribe” view for long-term investors. Some even advised investing for listing gains.
Wide breadth and depth
The attraction starts with breadth and depth. Tenneco Clean Air India manufactures clean-air after-treatment systems, powertrain components and ride-control products, supplying India’s top passenger and commercial vehicle OEMs and serving exports and aftermarket under global brands like Champion and Monroe. “The growth will be led by rising premiumization and stricter emission norms,” said Aditya Birla Capital Stocks and Securities.The company runs 12 plants across seven states and a union territory and two India R&D centres that co-create platforms with OEMs. Installed capacity and utilisation are healthy across hot-end catalytic converters, cold-end exhausts and ride technologies, leaving room to grow without heavy upfront capex.
According to BP Wealth, Tenneco has long-standing customer relationships averaging 19.2 years with its top 10 clients and that it has established deep technical integration with OEMs, reinforced by stringent qualification processes and homologation requirements that contribute to high customer stickiness.
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Strong market standing
Market position is another pillar. Canara Bank Securities says the company has leadership across several sub-segments, including roughly 57% in clean-air systems for commercial trucks, about 68% in off-highway equipment and around 52% in shock absorbers and struts for passenger vehicles.This positioning sits on top of group-level IP — over 5,000 active patents and 7,500 trademarks — that can be adapted to Indian cost structures through local engineering and sourcing.
Financials steady
Financially, the story has been about operating leverage and margin repair. While FY23-FY25 revenue was broadly flat given the auto cycle, EBITDA margin expanded from 11.8% to 16.7%, lifting PAT to Rs 552–553 crore in FY25 and improving return ratios. One note flags ROE rising to 42.7% and ROCE to 56.8% in FY25, reflecting a tighter cost base and mix benefits.
Above all, a discounted valuation
At the top end of the price band, brokers peg valuation around 29x FY25 P/E and roughly 19x EV/EBITDA — described as reasonable by some and discount against peers by many given the asset base, localisation and scale. The pricing is well below listed peers in the auto components space like Bosch (57x), Uno Minda (64.9x), and Gabriel India (82.5x).
Add a tinge of industry tailwind
What could sustain earnings from here is a clutch of industry tailwinds. Analysts point to tightening emission regimes (BS7, CAFE, TREM V, CEV-V) that raise content per vehicle in clean-air, premiumisation that lifts demand for advanced ride technologies, and the company’s ability to participate in hybrid/electric transitions via engine-agnostic suspension and selected powertrain offerings. The India plants also act as a cost-competitive base for exports to group entities and global OEMs, adding a second growth lever beyond the domestic cycle.
Over 80% domestic sourcing in FY25 and a manufacturing footprint close to OEM hubs, supported by lean programs and global operating systems that standardise quality and lower defects. The two R&D centres collaborate early in design and validation, helping embed the company in customers’ product roadmaps.
Balance sheet quality also features in the bull case. One report underlines a net-debt-free profile, robust cash generation, and a shift toward premium products — all of which, combined with steady capex needs, support free cash flow and returns.
Few Risks Remain
Auto components are cyclical, and revenue concentration in PVs and CVs exposes the company to downcycles. Regulatory dependence cuts both ways: tighter norms lift kit value, but policy delays or rapid EV adoption can pressure parts of the clean-air portfolio.
There is also reliance on the global parent for brand licences, technology and know-how, which is integral to the competitive edge. Brokers flag these as factors to monitor, even as the diversified portfolio and aftermarket/export mix offer some cushioning.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)