TENNIND

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%.

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.

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.

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.

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.

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.