Tenneco Clean Air India Ltd Q4 FY26 Earnings Call: Order Book Crosses Rs. 1,24,000 Million, EBITDA Margin at Record 18.8%

Tenneco Clean Air India Ltd held its Q4 FY26 earnings call on May 28, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Record Revenue and Margin Performance

• Q4 FY26 revenue from operations— grew 17.1% YoY to Rs.15,524 million; value-added revenue (BAR) rose 17.5% to Rs.14,058 million.
• Q4 EBITDA— increased 17.6% YoY to Rs.2,573 million, with margins stable at 18.3% of BARdespite geopolitical cost pressures, mitigated by commercial actions and operational efficiencies.
• Q4 net profit— grew 18.8% YoY to Rs.1,668 million, with margin improving to 11.9%.
• Full year FY26 revenue from operations— grew 10.5% to Rs.54,040 million; BAR grew 12.3% to Rs.49,118 million.
• Full year FY26 EBITDA— rose 13.5% to Rs.9,255 million, with margin expanding to 18.8% of BAR — the highest ever full-year EBITDA margin — driven by P3 operational efficiencies, better fixed cost absorption, and commercial recoveries.
• Full year net profit— stood at Rs.6,044 million, up 9.3% YoY,including a one-time labour cost charge partially offset, with margin at 12.3%.

Rs.1,24,000M Lifetime Order Book Backs Mid-Term Growth

• Lifetime order book of Rs.1,24,000 millionas of 31 March 2026 provides 100% visibility to the company's FY28 (FY2027-2028) internal revenue target, supporting mid-term double-digit growth.
• Export mix expected to rise from 5-6%(Q4 FY26) to 14-20% of sales, ramping up from FY27-28 (FY2026-2028) onward, driven by technology equalisation, China+1 supply chain shifts, and labour cost arbitrage.
• Two new greenfield plants announced— a clean air plant in North India (commissioning in 6-12 months) and a shock absorber plant in West India (peak volumes by mid-FY28-29 i.e., FY2028-2029), with combined capex of ~Rs.1,400 million and a capex-to-steady-state revenue ratio of ~1:3.
• Capacity expansion for suspension— the West India plant will handle both legacy suspension growth and new technology (Da Vinci DCX / CVSA) volumes targeting ~50% penetration of India's 5.5 million PV market.
• Cash flow generation— equivalent to 58% of EBITDA after capex of Rs.1,150 million in FY26; company remains debt-free with net debt-to-equity of negative 0.4.

CAFE 3, BS7, and Da Vinci Open New Revenue Runways

• CAFE 3 norms effective FY27-28 (FY2027-2028)— management expects aftertreatment content per vehicle to increase by 1.3x to 1.5x, creating an additional addressable market of Rs.300-400 crores over the next three to five years.
• BS7 norms— expected to add another Rs.1,000 crores to the addressable market, bringing the combined regulatory opportunity to Rs.1,300-1,400 crores in the next three to five years.
• Petrol particulate filter entry— management secured entry into India's largest PV OEM's supplier panel from FY28 (FY2027-2028) onward, driven by CAFE 3 norms requiring gasoline particulate filters — described as a "high-tech, high-margin product."
• Da Vinci DCX mechanical suspension— described as a "world's first purely mechanical suspension system"; generating interest from 3-4 OEMs (Indian, Japanese, Korean, European), achieving 85-90% of comfort improvement at low delta cost vs. conventional systems.
• Hybrid vehicle tailwind— management noted US/Europe markets are "shifting from full EVs to hybrid/range extender solutions," benefiting Tenneco's Clean Air business for all non-full EV applications; hybrid content may increase 1.5x to 2x vs. ICE due to acoustic valves.

Structural Margin Improvement with Strong Cash Conversion

• FY26 standalone margins improved ~200 bpsdriven by clean air efficiencies, export mix, and the P3 operating model; management expects margins to remain stable entering FY27 (FY2026-2027).
• Return on capital employed (ROCE)— improved to 94% in FY26 from 57% in FY25; fixed assets turnover improved to 9.6x from 8.4x.
• Cash conversion cycle— remained at negative 23 days, reflecting strong working capital management.
• Localisation at ~89-90%— management aims to maintain this level over the long term, gradually increasing for new technologies post-germination,mitigating import currency risk.
• Direct material costs covered— steel and stainless steel are covered by escalator agreements with OEMs, updated quarterly; indirect costs (freight, currency, plastics, rubber, LPG, crude oil) are being bundled for recovery from customers.
• Rupee depreciation advantage— management sees current context providing an immediate 15-20% improvement in export competitiveness for FY26-27 (FY2026-2027).

New OEM Wins and Export Diversification Gain Traction

• Da Vinci DCX order secured— from a leading Indian OEM for a next-generation flagship SUV platform; management is expanding applications with other OEMs across mid-to-premium range (up to Rs.35 lakh MSRP).
• Japanese OEM bearing system entry— strategic first entry into a Japanese customer's supplier panel; CEO stated it "opens the door for much faster growth" with that customer.
• Significant clean air project win— won in Q4 FY26, reinforcing the division's competitive position; clean air CV business grew ~10-11% in FY26vs. industry CV growth of ~18%, attributed to OEM mix shifts and absence from India's largest PV OEM; no competitive market share was lost.
• No current plan to enter two-wheeler segments— management prioritises profitable growth and would only enter with technology differentiation via organic or M&A routes.
• Export model structure— partnership with Tenneco Europe and US for child parts, sub-assemblies, or finished goods; can approach third-party OEMs with permission where Tenneco group is not focused, targeting North America, South America, Europe, and Asia.
• IPO oversubscription— 61.8x overall, with QIB portion at 174.8x; stock has outperformed BSE Sensex and BSE Auto since listing.

Multi-Year Regulatory and Capacity Tailwinds

• FY27 (FY2026-2027) entry— management enters with strong visibility and a resilient financial foundation, supported by robust order book and disciplined capacity expansion.
• Export ramp-up timeline— expected to gain critical mass from FY27-28 (FY2026-2028) onward, driven by technology equalisation and China+1 trends across clean air and shock absorber products.
• Regulatory runway— CAFE 3 (effective FY27-28) and BS7 norms provide a multi-year tailwind with Rs.1,300-1,400 crores of additional addressable market over the next three to five years.
• New plant commissioning— two greenfield facilities with combined capex of ~Rs.1,400 million, commissioning in 6-12 months, peak volumes by mid-FY28-29 (FY2028-2029).
• No additional material updates— the call concluded with no further forward-looking guidance beyond what was discussed; management confirmed the next quarterly call will follow in due course.