Tenneco Clean Air IPO opens: Brokerages see good business fundamentals, but limited near-term upside

The Rs 3,600-crore initial public offering of automotive component manufacturer Tenneco Clean Air India opened for public subscription on Wednesday, with brokerages describing it as a fundamentally strong but moderately valued play on India’s auto component growth story. Analysts cite the company’s dominant market share in emission-control and suspension systems and improving margins as key positives, but flag its dependence on a few large clients and the absence of a fresh fund-raise as factors limiting near-term upside.

Strong institutional response in anchor round

Brokerage firm Master Capital says Tenneco Clean Air is strategically positioned to benefit from India’s accelerating automotive production and exports, given its leadership in clean air and suspension solutions and long-standing relationships with top OEMs. The company supplies to 101 customers in India and abroad, including Maruti Suzuki, Tata Motors, Mahindra & Mahindra, Hyundai, Ashok Leyland, and Bajaj Auto. It holds about 57 percent market share in clean air solutions for commercial trucks and 52 percent share in shock absorbers and struts for passenger vehicles.

Ahead of the IPO, Tenneco Clean Air raised Rs 1,080 crore from 58 anchor investors on November 11. The allocation of 2.72 crore equity shares at the upper price band of Rs 397 per share saw participation from top domestic mutual funds such as SBI MF, ICICI Prudential MF, HDFC AMC, Kotak AMC, Axis MF and Tata MF, along with global investors including BlackRock, Fidelity, Nomura, Goldman Sachs, Abu Dhabi Investment Authority, and Norway’s Government Pension Fund Global. The strong institutional response set a steady tone for the public offer.

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IPO structure and financial performance

The issue, which will close on November 14, is entirely an offer-for-sale (OFS) by the promoter Tenneco Mauritius Holdings, meaning that the company will not receive any funds from the offer. Half of the IPO is reserved for qualified institutional buyers, 15 percent for non-institutional investors, and 35 percent for retail investors. Shares are expected to list on November 19 on both BSE and NSE. The IPO’s price band is set at Rs 378-397 per share, and at the upper end, the lot size for retail investors works out to Rs 14,689 for 37 shares.

Tenneco Clean Air operates 12 manufacturing facilities across India and provides clean air, powertrain and suspension solutions to automobile and industrial clients. Its June-quarter profit stood at Rs 167.8 crore, up 12 percent year-on-year, while revenue rose slightly to Rs 1,285.6 crore. For FY25, the company reported a 32.5 percent increase in net profit to Rs 552 crore despite a 10.6 percent decline in revenue, aided by higher operating efficiency and lower raw material costs. EBITDA margin improved to 16.7 percent from 11.2 percent the previous year.

Balanced outlook: leadership offset by concentration risks

Brokerages highlight the company’s strong market position and efficient capital use but urge caution over customer concentration risks -- its top 10 clients contribute around 80 percent of revenues -- and its reliance on the internal combustion engine ecosystem. The offer being entirely an OFS also means no new capital infusion to fund expansion or reduce debt.

Harshal Dasani, business head at INVasset PMS, said the issue “marks a noteworthy moment for India’s auto-component landscape” and that Tenneco Clean Air “boasts leadership in clean-air solutions and a high-return, net-cash profile.” However, he added that “a high degree of customer concentration and the looming risk of electrification reducing demand for traditional exhaust solutions warrant caution.” According to Dasani, the IPO is a “moderately attractive play for investors with a long-term horizon and belief in India’s internal combustion vehicle and clean mobility transition.”

However, the absence of a growth capital component and exposure to cyclical auto trends restrain expectations of immediate listing gains.

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