Tenneco Clean Air India Limited — Q3 FY26 earnings call

Call held 16 Feb 2026

Management summary

Tenneco Clean Air India Limited delivered robust Q3 FY26 performance with Value Added Revenue growing 14.7% YoY to ₹11,941 million and EBITDA up 24.8% YoY to ₹2,225 million. The company secured significant program wins for its DaVinci DCx suspension system and a Clean Air aftertreatment system, reinforcing its market leadership. A new greenfield plant with ₹710 million capex was approved to support future growth, while PAT was affected by a one-time labor code impact.

Highlights

  • Value Added Revenue (VAR) grew 14.7% YoY to ₹11,941 million, demonstrating continued momentum.

  • EBITDA increased by 24.8% YoY to ₹2,225 million, with healthy EBITDA margins of 18.6% of VAR.

  • Strong underlying business performance led to an adjusted PAT of ₹1,391 million, with an 11.7% margin on VAR.

  • Secured a significant DaVinci DCx advanced suspension system win with a leading Indian OEM, with an estimated annual revenue potential of ₹2,200 million.

  • Approved a new greenfield plant in North India with ₹710 million capex to support future Clean Air growth and enhance operational footprint.

Concerns

  • Profit After Tax (PAT) was impacted by a one-time charge of ₹203 million due to a recently notified labor code, resulting in a reported PAT of ₹1,188 million.

  • Clean Air and Powertrain segment revenue growth was 5.4% YoY, underperforming the Advanced Ride Technologies segment (24.5% YoY) in Q3 FY26.

Key financials

  1. Revenue from Operations 12,853 Mn +14.2%YoY
  2. Value Added Revenue (VAR) 11,941 Mn +14.7%YoY
  3. EBITDA 2,225 Mn +24.8%YoY
  4. EBITDA Margin (on VAR) 18.6%
  5. PAT 1,188 Mn
  6. Adjusted PAT (excl. one-off) 1,391 Mn
  7. Adjusted PAT Margin (on VAR) 11.7%
  8. ROCE 80%

What they filed

Q1 FY27: revenue up 14.3%, net profit down 18.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue523 479 610 566 542 +4%507 +6%673 +10%647 +14%
EBITDA111 103 132 119 111 +0%101 −2%139 +5%127 +7%
Net profit75 65 86 112 939 +1152%60 −8%92 +7%91 −19%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Revenue
11,941 Mn Total
  • Advanced Ride Technologies 6,297 Mn 52.7%
  • Clean Air and Powertrain 5,644 Mn 47.3%

Capital allocation

high confidence
  • Capex Capex disclosed
    • Greenfield plant in Kharkhoda, Haryana, to strengthen proximity to northern customer base and support awarded programs across light vehicles, off-highway, and tractor segments. ₹710 Mn
    Now, supporting the Clean Air growth trajectory, our Board has approved to develop a greenfield plant in North India, namely in Kharkhoda, Haryana, to strengthen proximity to the northern customer base and to support awarded programs across light vehicles, off-highway, and tractor segments. This project envisages INR710 million capex with an estimated start of production in Q3 FY27, further enhancing Tenneco's operational footprint and customer responsiveness.

Guidance & targets

Exports

  • Exports CAGR Exports · Medium confidence much higher
    I think exports will see a much higher CAGR. Already exports the CAGR is very, very, very strong double digit growth.

    — Arvind Chandrasekharan

Capacity

  • Kharkhoda Plant Start of Production Capacity · Q3 FY27 · High confidence Q3 FY27
    Yes. So as far as this new plant is concerned, like we would kind of start the investment within this quarter, and we should see the ramp up in Q3 FY27.

    — Mahender Chhabra

  • Capacity Utilization Capacity · next three years · High confidence double-digit CAGR
    We would be kind of investing the capacity utilization because we are looking at a strong double-digit CAGR for the next three years, so we would be investing in the capex.

    — Mahender Chhabra

Market context

  • Revenue CAGR Revenue · next three years · High confidence double-digit
    this order book provides full 100% revenue coverage through FY 2028 and supports a clear double-digit CAGR visibility over the next three years, therefore vastly outperforming the market.

    — Arvind Chandrasekharan

What to watch in Q4 FY26

Order book value disclosure

Next quarter (H2 FY26 earnings)
Current Not disclosed this quarter
Target Quantified order book for H2 FY26

Why it matters

Order book provides strong revenue visibility and is a key indicator of future growth, especially given the double-digit CAGR guidance.

Yes. So order book we decided we'll publish it every six months. So we did one the previous Q2. The next one if I can just ask you to ask me this question in about two and a half three months, that would be great. We will publish the order book for the second half of the year post the end of the financial year.

Risks & concerns

  • One-time impact from new labor code

    medium

    A one-time impact of ₹203 million on PAT due to calculation of statutory benefits as per new definition.

    For profit after tax, we had a one-time impact of recently notified labour code, which required us to go back in time to calculate the full impact of statutory benefits as per the new definition. Due to this one-time impact, our PAT came out at 9.9%. However, without this, we would have been much better quarter-over-quarter, showing strong underlying business performance improvement.

    Management acknowledged

  • Potential pushback on emission norms (CAFE/TREM 5)

    low

    Analyst concern about potential delays or concessions on stricter emission norms, but management believes OEMs are keen to adopt for export competitiveness.

    So I think look, there are always rumors on push back etc across CAFE, TREM 5, even BS 7 as you know. But from our standpoint we're not seeing that. We're seeing that OEMs really want to get ahead of the curve. And there's one main reason for that. And the reason for that is exports, right?

    Analyst downplayed

  • EV transition and market shift back to ICE/Hybrid

    low

    Management observes a trend in US and Europe of buyers moving back from EVs to ICE/hybrid due to subsidy removal and resale value concerns, which could benefit Tenneco's core business.

    And you're seeing this trend in both the US and Europe where people are moving back, like they buy an EV and after two, three years then they realize that the selling the resale value drops dramatically because nobody wants to buy an electric vehicle with just 40% state of charge, right? And that prompted a lot of buyers to move back to the ICE world, right?

    Management acknowledged

Q&A highlights

6 direct, 1 evasive
DaVinci suspensions vs semi-active suspensions Direct
No, it's different in the sense that, it's a purely mechanical suspension. It really has the best combination of affordability and performance in terms of ride quality. It has the shim stack discs that are arranged in a way that they allow selective hydraulic flow. So we don't really have any software or electronics like we have in the semi-active suspension, right?

Clarifies the unique mechanical nature of DaVinci DCx, differentiating it from more complex and expensive semi-active systems, highlighting its affordability and performance benefits.

Asked by Jinesh Gandhi

Market inquiries for DaVinci suspensions beyond Mahindra Direct
Yes. The demand is fast and furious. Everybody recognizes that this is a game changer. So it's just not it's Mahindra, it's obviously many other, Indian and also Japanese, Korean OEMs, every everybody is interested in this technology because it's at the right cost range, but at the same time from a performance standpoint, from a ride quality, comfort standpoint, it's a completely different level.

Indicates strong and broad market interest from multiple OEMs for the new suspension technology, suggesting significant future adoption.

Asked by Jinesh Gandhi

Geographic mix of export order book and tariff impact Direct
In terms of regions, look now going forward things are going to change, right? Because now the US we have become very competitive because even from 50 dropped not to 25 but to 18, which is excellent from a competitiveness standpoint for us. Same thing with EU, some like bearings which used to have 8% duties are now to zero.

Explains how recent tariff reductions (US from 50% to 18%, EU from 8% to 0% for some products) are significantly enhancing export competitiveness and will shift the geographic mix.

Asked by Jinesh Gandhi

Impact of CAFE/TREM 5 norms on Clean Air segment growth Partial
So I think look, there are always rumors on push back etc across CAFE, TREM 5, even BS 7 as you know. But from our standpoint we're not seeing that. We're seeing that OEMs really want to get ahead of the curve. And there's one main reason for that. And the reason for that is exports, right?

Management downplays concerns about regulatory pushback, asserting that OEMs are keen to adopt stricter norms due to export market requirements, which is a positive for Clean Air.

Asked by Jeemit Shah

Asset turnover for the new greenfield plant Direct
So for every rupee of capex invested, we typically this again gross block, right? So every rupee of capex gives us a steady state revenue of INR3.5 to INR4 rupees. Okay 1:4, right? On a net block basis we are more like 1:7 or 1:8, I would say.

Provides a clear financial metric for the efficiency of capital deployment for the new plant, indicating strong revenue generation per unit of capex.

Asked by Jeemit Shah

Clean Air vs Advanced Ride Technologies segment margins Evasive
Yes. Sure. So maybe I can cover the second question first. So as far as BU-wise margins are concerned, as an organization we decided that we would be kind of sharing the margins at a console level, even though there is a margin differential between the two, but we would be sharing the margins at a console level.

Management declined to provide segment-specific margin data, stating they report at a consolidated level, limiting investor insight into individual segment profitability.

Asked by Bhavika Jain

Clean Air segment underperformance in Q3 FY26 Direct
So look because our Clean Air light vehicle or let's call it passenger vehicle presence is not so much in the lower displacement engines. And the GST impact from a positive impact perspective has actually benefited more the smaller displacement engines that go on A and B segment cars where we are not present for the majority with this leading Japanese OEM.

Explains that Clean Air's Q3 underperformance was due to its limited presence in lower displacement engines and the GST impact benefiting smaller cars where the company has less market share.

Asked by Nitin

Impact of US climate regulations/EV transition on exports Direct
Yes. So very good question. I'm glad you brought it up. See the US has been and it's also got to do with EV stories. EVs always had subsidies and that's the reason they were selling and now if you take the subsidies away, they don't become very attractive anymore, right? Or they become less attractive. And you're seeing this trend in both the US and Europe where people are moving back, like they buy an EV and after two, three years then they realize that the selling the resale value drops dramatically because nobody wants to buy an electric vehicle with just 40% state of charge, right? And that prompted a lot of buyers to move back to the ICE world, right?

Management highlights a potential shift back from EVs to ICE/hybrid vehicles in the US and Europe due to reduced subsidies and resale value concerns, which could be positive for Tenneco's ICE-related products and exports.

Asked by Jeemit Shah

3 min read 6 chapters

Detailed narrative

Q3 FY26 Financial Performance Overview

Tenneco Clean Air India Limited reported robust Q3 FY26 results, with Value Added Revenue (VAR) growing 14.7% year-over-year to ₹11,941 million. EBITDA saw a significant increase of 24.8% year-over-year, reaching ₹2,225 million, with EBITDA margins at a healthy 18.6% of VAR. Profit After Tax (PAT) was ₹1,188 million, impacted by a one-time charge of ₹203 million related to a new labor code; excluding this, adjusted PAT stood at ₹1,391 million, reflecting an 11.7% margin on VAR. The company maintained strong Return on Capital Employed (ROCE) levels exceeding 80%.

Strategic Program Wins: DaVinci DCx Suspension System

A key highlight of the quarter was the strong validation of Tenneco's technology leadership through the adoption of its DaVinci DCx advanced suspension system by a leading Indian OEM for a next-generation flagship SUV platform. This win alone has an estimated annual revenue potential of ₹2,200 million. The DaVinci DCx system is lauded for its unique mechanical architecture, offering a superior combination of performance and affordability without the complexity of electronics, making it a game-changer for passenger vehicle segments.

Clean Air Business Growth and Greenfield Plant Investment

Tenneco also secured a strategic Clean Air program win with a global commercial vehicle OEM for a modular in-line BS6 aftertreatment system, with an estimated annual revenue potential of ₹1,150 million. To support the Clean Air growth trajectory, the Board approved a new greenfield plant in Kharkhoda, Haryana. This project involves a capex of ₹710 million and is expected to commence production in Q3 FY27, enhancing the company's operational footprint and customer responsiveness in North India.

Export Momentum and Tariff Benefits

Exports are gaining significant traction, now contributing over 20% to the total order book, up from 5% previously. Management expects exports to see a much higher CAGR, driven by improved competitiveness due to recent tariff reductions. Tariffs for the US market have dropped from 50% to 18%, and for some EU products, they have reduced from 8% to zero, making Indian exports more competitive and balancing the geographic mix of the order book.

Clean Air Segment Performance and Outlook

The Clean Air and Powertrain segment recorded revenue of ₹5,644 million, growing at 5.4% year-over-year in Q3 FY26, which was lower than the Advanced Ride Technologies segment's 24.5% growth. Management attributed this to the Clean Air segment's limited presence in lower displacement engines and the positive impact of GST primarily benefiting smaller A and B segment cars. However, the company anticipates Clean Air growth to align with market growth over time, especially with inroads made into the hot end at a leading Japanese OEM.

Industry Trends and EV Transition Dynamics

Management noted supportive industry trends, including tighter emissions norms, rising expectations for comfort and safety, and a continued shift towards SUVs. They also highlighted a potential shift back from Electric Vehicles (EVs) to Internal Combustion Engine (ICE) or hybrid vehicles in the US and Europe. This trend is observed due to reduced EV subsidies and concerns over resale value, which could be favorable for Tenneco's core business in ICE and hybrid components.

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