Tenneco Clean Air IPO

It maintains a market-leading position as the largest supplier of Clean Air Solutions to Commercial Truck (CT) OEMs with a 57% market share (FY25) and is the largest supplier of shock absorbers or struts to Passenger Vehicle (PV) OEMs with a 52% market share (FY25).

The restated profit for the year demonstrated considerable growth, increasing from ₹381.04 crore in FY23 to ₹553.14 crore in FY25, reflecting a Compound Annual Growth Rate (CAGR) of 20.5%.

The company maintains high financial efficiency, evidenced by a Return on Capital Employed (ROCE) of 56.78% in FY25, positioning it favorably against its industry peers.

It has consistently maintained a highly positive net cash position, operating as a net debt-free company across the last three fiscals. As of June 30, 2025, its net debt was strongly negative at ₹347.57 crore.

The company demonstrates effective use of infrastructure, evidenced by a Fixed Assets Turnover Ratio of 8.37 times in FY25. Furthermore, its Payable Days reached 105 days in FY25, successfully utilizing supplier credit as a cost-free funding source.

The company operates with exceptional cash flow management, demonstrated by a highly efficient and negative cash conversion cycle (CCC), improving from -10 days in FY23 to -24 days in FY25. This negative cycle indicates that the company receives cash from customers faster than it pays suppliers, maximizing free cash.

It serves a large client base, including all top seven PV OEMs and all top five Commercial Truck (CT) OEMs in India (FY25). Its top ten customers have been associated with it for an average of 19.2 years.

It benefits significantly from leveraging the Tenneco Group’s global R&D initiatives, intellectual property, and technical know-how to engineer proprietary products, possessing nine registered designs and one granted patent in India.

It relies heavily on a limited number of clients, as its top ten customers (based on FY25) contributed 81.54% of its revenue from operations in that period. Losing any of these customers could severely impact operations.

Operations are vulnerable to volatility in commodity prices, especially for steel, as the cost of materials consumed accounted for a substantial 65.05% of revenue from operations in FY25.

The business is heavily concentrated in specific markets, deriving 82.04% of its revenue from operations from the passenger vehicle (PV) and commercial vehicle (CV) sectors in India during FY25. A downturn in these sectors poses a significant risk.

The IPO is a completely offer-for-sale, which means it won’t receive any money from the IPO; the entire funds will go to the selling shareholder, Tenneco Mauritius Holdings Limited.

The high utilization levels at key manufacturing facilities pose a capacity constraint risk. This is evidenced by Fiscal 2025 utilization rates: the Puducherry Facility operated at near-maximum capacity (99.68%), while the Bhiwadi Facility achieved 96.00% and the Hosur Facility was at 88.38%. Failure to expand capacity may restrain the ability to meet additional product demand.

It faces total contingent liabilities of ₹116.68 crore as of June 30, 2025, mostly concerning income tax matters. Furthermore, a subsidiary experienced a reported loss of ₹19.44 crore due to misappropriation and "material weakness" in internal financial controls as of March 31, 2023.

Its awarded programs, though long-term (three to seven years), generally lack firm volume commitments in customer agreements. This means the anticipated sales volume may not materialize, negatively impacting the financial condition and cash flows.