Tenneco Clean Air India IPO Opens — Should You Bid? Read DRChoksey's Report For Key Issue Details

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DRChoksey Report

Tenneco Clean Air India Ltd. launched its initial public offering today, November 12 and will conclude on Nov. 14. An engineered automotive component supplier has fixed the price band in the range of Rs 378 and Rs 397 per share. Retail investors must bid for a single lot size of 37 shares, requiring an investment of Rs 14,689.

The Rs 3,600-crore IPO is an entirely offer-for-sale of 9.07 crore shares. Since the IPO is entirely an OFS, proceeds from the offer will go directly to the selling shareholders.

Shares of the company are tentatively scheduled to be listed on the BSE and NSE on November 19.

Objects of the Issue

Analysis of Proceeds

The IPO is a 100% Offer for Sale by the Promoter Selling Shareholder, Tenneco Mauritius Holdings Ltd. The critical implication for prospective investors is that the company itself will receive no proceeds from the issue.

All funds raised, aggregating up to Rs 3,600.00 million, will go directly to the selling shareholder. This means the IPO is not being conducted to raise capital for growth, new projects, acquisitions, debt repayment, or any other corporate purpose.

The two stated objects of the offer, as listed in the DRHP, are:

1. To allow the Promoter Selling Shareholder to sell shares aggregating up to Rs 3600 crores.

2. To achieve the benefits of listing the company’s shares on the stock exchanges.

Outlook

Tenneco India is strongly positioned to capitalize on favorable industry tailwinds, underpinned by its market leadership, technological prowess, and robust financial health.

The company commands a dominant market share, ranking as the largest supplier of Clean Air Solutions to Indian Commercial Truck OEMs (57% share) and the largest supplier of shock absorbers and struts to Indian Passenger Vehicle OEMs (52% share).

This leadership is supported by key differentiators, including deep integration with the global Tenneco Group for R&D and sticky relationships with top-tier OEMs creating high switching costs. Financially, its net debt-free status and superior return metrics provide significant operational flexibility.

Red Flags

100% Offer for Sale (OFS):

The company will receive zero proceeds from the IPO. No new capital is being raised for growth or corporate purposes. The entire benefit goes to the selling promoter, indicating the primary motive is to provide an exit.

Significant Governance Concerns:

A documented history of material issues including a INR 194.45 million (INR 19.45 crore) fraud by ex-employees at a subsidiary, multiple whistleblower complaints, and repeated "Emphasis of Matter" notes from auditors concerning non-compliances.

Extreme Customer Concentration:

High dependency on a small number of customers ( 82% of revenue from the top 10), making the company vulnerable to shifts in purchasing decisions from any single client.

Material Ongoing Litigation:

Notable legal proceedings are active, including a SEBI appeal at the Supreme Court level related to a group company’s open offer, which represents a significant regulatory overhang.

Valuation Analysis

The IPO is considered competitively priced as it is valued at a Price-to-Earnings (P/E) multiple of approximately 29x based on FY25 earnings. This represents a significant discount compared to its auto ancillary peers, such as Bosch Ltd. and Uno Minda, which are trading at an average P/E of around 48-50x.

The company’s primary moat is its dominant market leadership, holding over 50% share in key segments like clean air solutions for commercial trucks and shock absorbers for passenger vehicles.

This position is secured by high switching costs from deep OEM integration (like Maruti Suzuki and Tata Motors) and access to its global parent’s advanced, proprietary technology required to meet strict emission norms.

Click on the attachment to read the full IPO report:

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