Tenneco Clean Air: Can suspension tech drive its next growth phase?

But Mahindra did not make the DaVinci damper. It was developed and built by the same supplier behind Monroe CVSAe, the semi-active suspension that debuted a year earlier on Mahindra’s BE 6 and XEV 9e, the first electronically controlled suspension offered in India.

The same supplier also makes the catalytic converters used in most trucks built in India.

That company is Tenneco Clean Air India.

Tenneco Clean Air: Stock Price Movement

Source: http://www.tradingview.com

If the name rings a bell, it may be because its November 2025 IPO was one of the year’s most oversubscribed. The Rs 3,600 crore offer, entirely an offer-for-sale by Apollo Global-owned American parent, drew bids for 61.7 times the shares on offer.

BlackRock, Fidelity, Nomura and Norway’s sovereign wealth fund were among the anchor investors.

The stock listed at Rs 505, a 27% premium to its Rs 397 issue price.

But the more important question for investors taking a fresh look at the company is:

Is this a 94% ROCE, regulation-supported, cash-generating suspension technology business providing the next phase of growth?

Is it an ICE-era cash cow whose best years are behind?

Let’s dive in.

A century-old multinational, a three-year-old stock

Tenneco Inc. is one of the world’s largest Tier-1 auto component makers, home to brands that mechanics have trusted for nearly a century: Monroe in ride control, Champion in spark plugs, Walker in exhaust.

In 2022, private equity firm Apollo Global took the parent private in a $7.1 billion buyout, subsequently began streamlining the portfolio and monetising selected assets. The Indian clean air business, incorporated as a separate entity in 2018 and later consolidated with the powertrain and ride businesses, emerged as one of Apollo’s monetisation avenues.

The proceeds from every share sold at the IPO went to Tenneco Mauritius, none to the listed Indian arm. The parent still owns 74.79%.

The current arrangement with the parent co is that Tenneco Clean Air India gets globally proven technology, such as DaVinci and CVSAe, without bearing decades of R&D cost.

In exchange, it pays a royalty of 2.5% of net revenue (about Rs 110 crore a year), and between FY22 and Q1 FY26 it shipped Rs 1,693 crore of dividends upstream, including a notably high dividend payout in FY25, the year preceding the IPO.

Understanding the business: Two segments, twelve plants

Tenneco Clean Air India operates 12 manufacturing plants across the country, organised into two business segments: Clean Air & Powertrain Solutions and Advanced Ride Technologies (ART).

Source: Q4FY26 presentation

The Clean Air & Powertrain Solutions segment is the legacy business which contributes 49.4% of FY26 revenue. While powertrain products provide a steady stream of OEM and aftermarket business, clean air solutions form the strategic core of the segment. Tenneco is the largest supplier of clean air systems to Indian commercial vehicle OEMs, commanding an estimated 57% market share. These systems are far more than simple exhaust components. Modern after-treatment systems integrate catalysts, sensors, and sophisticated emissions-control technologies that are engineered into a vehicle platform years before production begins. Once validated, suppliers are rarely changed during a model’s lifecycle, creating long product cycles and strong customer stickiness.

The Advanced Ride Technologies (ART) segment contributed roughly 50.6% of FY25 revenue and houses the company’s Monroe business. It manufactures shock absorbers, struts, and suspension technologies for passenger vehicles, commercial vehicles, and the aftermarket. Tenneco is also the market leader in this segment, supplying around 52% of the shock absorbers and struts purchased by Indian passenger vehicle OEMs.

As vehicles become more software-driven, the company is also introducing electronically controlled suspension systems that improve ride comfort and handling.

The regulation flywheel

The clean air business grows on a simple, uncomfortable truth: every time India or the world tightens an emission norm, the exhaust system gets more complex and more expensive, and Tenneco’s content per vehicle rises.

Regulatory norms

Regulations

The key point isn’t the regulations themselves. It’s that every new standard forces OEMs to upgrade. When upgrades are mandatory, customers gravitate toward the proven supplier with scale, relationships, and validated technology, strengthening the incumbent’s competitive advantage.

FY26 added another gear to the flywheel. Tenneco secured its first Clean Air programme with a leading Japanese passenger vehicle OEM, marking entry into a customer it had previously not served in this business. With management estimating that CAFE III and BS VII together could unlock a Rs 1,300-1,400 crore addressable opportunity over the next three to five years, the regulatory cycle provides a long runway for higher-content premium emissions technologies.

Beyond catalytic converters: The next wave of emissions technology
For years, reducing vehicle emissions meant using catalytic converters to neutralise harmful gases. The next frontier is particulate emissions from modern gasoline direct-injection (GDI) engines.

This is where the Gasoline Particulate Filter (GPF) comes in. Similar to a Diesel Particulate Filter (DPF), it traps microscopic soot particles before they exit the tailpipe, becoming another critical component in modern after-treatment systems.

For Tenneco, this means supplying increasingly sophisticated integrated solutions comprising catalytic converters, GPFs, DPFs, SCR systems, sensors and electronic controls rather than simple exhaust assemblies. Management believes this transition is only beginning, with BS VII and CAFE III expected to create a Rs 1,300-1,400 crore opportunity over the next three to five years, driven by higher emissions technology content per vehicle rather than higher vehicle production.

This is precisely why the Clean Air business resembles a regulation-driven compounding business: every tightening of emission norms increases the complexity, value and content of the systems Tenneco supplies.

Inside the suspension business: Monroe, DaVinci and half the company

If clean air is the annuity, the suspension business is the story stock hiding inside, and it is no longer a side business.

In FY26, Advanced Ride Technologies delivered revenue of Rs 2,489 crore, growing 19.7% year-on-year against 5.5% for clean air and powertrain. So, on a value-added basis, suspension is now roughly half the company, and nearly all of its incremental opportunity.

The suspension segment is built on Monroe’s foundation. Five dedicated plants supplying 52% of the shocks and struts Indian passenger vehicle OEMs buy, plus a sticky aftermarket built on one of the oldest brand names in global auto parts. On top of that base sit two technology plays aimed at two different Indias.

At the premium end sits CVSAe, Tenneco’s electronically controlled semi-active suspension, already featured on the BE 6 and XEV 9e, where sensors continuously adjust damping in real time.

For the broader market, however, the real opportunity is DaVinci DCx.

As the company puts it, the technology delivers “85-90% of the way” to a fully electronic suspension without sensors, motors, ECUs, or software, at only a small premium over a conventional shock absorber or “about the cost of a dinner for two at a five-star hotel.”

Essentially, management believes this makes DaVinci an affordable premium suspension solution for the mass-market passenger vehicle segment

DaVinci Suspension

At the core of the system is DaVinci Suspension’s DCx piston valve, which uses a precisely calibrated stack of thin metal shims. As piston speed changes, the shims deflect by varying amounts, automatically adjusting the damping force. This allows the same damper to remain compliant over potholes, stable while cornering, and composed over high-speed road imperfections.

Commercial traction is already visible. The Mahindra XUV 7XO programme alone carries an annual revenue potential of around Rs 220 crore.

More importantly, DaVinci is a patented Tenneco technology and is not exclusive to Mahindra. Management is already in discussions with Indian, Korean and Japanese OEMs, while Tenneco’s global teams are evaluating the platform for China and Europe, positioning the India business as a potential export hub for the technology.

Margins are already healthy and should improve further as pistons and other imported components are localised. To support future demand, the company is also setting up a greenfield ART plant in western India.

The order book: Paid-for growth through FY28

FY26 closed as the company’s best year on record: revenue up 10.5% to Rs 5,404 crore, EBITDA up 13.5% to Rs 925 crore, and EBITDA margin at a record 18.8%, up from 18.6% a year earlier.

Source: Q4 FY26 investor presentation

The future visibility a strong order book offers is what the market is really paying for. The lifetime order book stands at Rs 12,400 crore, which management says already covers more than 100% of its FY28 revenue targets, underwriting its guidance of double-digit growth through FY28.

The mix of that book is telling: exports are only 5-6% of sales today but 14-20% of new bookings, spread across North America, South America, Europe and Asia, as global customers diversify sourcing away from China.

Planned capex to support the order book is a modest Rs 140 crore, split between the Kharkhoda clean air plant in Haryana and the new suspension plant in the west. With a historical gross-block-to-sales ratio of roughly 3.5-4:1, small investments offer meaningful capacity.

The financials: Where capital efficiency meets cash generation

The financials tell a story of improving quality rather than rapid growth.

Reported revenue has been distorted by fluctuations in precious metal prices, which largely pass through the P&L. To better reflect the underlying business, management tracks Value Added Revenue (VAR), which excludes these pass-through costs.

While reported revenue remained relatively subdued between FY23 and FY26, VAR continued to grow, supported by higher volumes, exports and a richer product mix.

Source: http://www.screener.in

The improvement in profitability has been equally impressive. EBITDA margin expanded from around 18.6% in FY25 to 18.8% in FY26, while PAT grew from Rs 553 crore to Rs 604 crore, a 9.2% YoY growth.

What truly sets Tenneco apart, however, is its capital efficiency. A negative cash conversion cycle, capital-efficient manufacturing and disciplined capital allocation allow the company to generate exceptional returns with relatively modest incremental investment.

In FY26, it generated Rs 1,429 crore of operating cash flow with more than 2x its reported operating profit. Few Indian manufacturers combine such strong cash generation with consistently high returns on capital.

Risks

The elephant in the room is electrification. Roughly 57% of revenue serves the internal combustion engine’s exhaust and innards, products an EV simply does not have. The bet embedded in the stock is that trucks, tractors, construction equipment and gensets electrify far more slowly than cars, which is reasonable, but it puts a clock on the core business.

Valuations

At around Rs 50 per share, Tenneco commands a market capitalisation of roughly Rs 22,200 crore, valuing the company at around 36x FY26 earnings after the stock rallied from Rs 438 to Rs 657 per share in just eight months from listing.

Source: http://www.screener.in

Sustaining that valuation will require the next leg of growth to come from ART Business because FY26 trailing PEG ratio of 2.0 and an EBITDA growth of 14% do not support current valuations.

DaVinci DCx and intelligent suspension will need to expand beyond Mahindra to a broader set of OEMs, while exports scale meaningfully from current levels. At the same time, the mature Clean Air business must continue compounding through higher content per vehicle from BS VII, TREM V and CEV V, even if volume growth remains modest.

If ART Business evolves into a meaningful second growth engine while Clean Air continues to generate cash and benefit from tightening regulations, Tenneco’s premium valuation will have a solid operational foundation.

Note: We have relied on data from http://www.screener.in and http://www.tijorifinance.com throughout this article. Market price and market capitalisation data are from Thurro. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.

Rahul Rao has helped conduct financial literacy programmes for over 1,50,000 investors. He has also worked at an AIF, focusing on small and mid-cap opportunities.

Disclosure: The writer or his dependents do not hold shares in the securities/stocks/bonds discussed in the article.

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