Best Auto Ancillary Stocks: Tenneco Clean Air IPO vs Sona BLW

The auto-ancillary sector is going through a steady shift as regulations tighten, and powertrains move gradually from traditional engines to hybrid and electric formats.

As per CRISIL Intelligence, the Clean Air Solutions industry is expected to grow at an 8-10% compounded annual growth rate (CAGR) during FY24-30. At the same time, Battery Electric Vehicle penetration is projected to rise from 4-5% today to 15-20% by FY30.

In this phase, Tenneco Clean Air has built its business around emission-control systems-a segment supported by regulatory timelines and the gradual pace of the shift from internal combustion engines (ICE) to electric vehicles (EVs).

In contrast, Sona BLW has built a presence in driveline and differential components, with a growing share linked to EVs. The two companies are positioned at different points in the same transition cycle.

Tenneco Clean Air depends on compliance-led demand that will be relevant in the coming years.

Sona BLW operates in areas that could benefit as electrification gathers scale.

For long-term investors, the question is how each business aligns with the industry's next growth phase.

Let's take a look...

Business Overview

Tenneco Clean Air

Tenneco Clean Air manufactures and supplies critical, highly engineered, and technology-intensive clean air, powertrain, and suspension solutions.

The company is a part of the global Tenneco group, which received 2.3% from Tenneco India as royalty in FY25. The company serves original equipment manufacturers (OEMs) and export markets.

The domestic market contributed 93.6% to revenue, with 6% coming from exports. In the export market, Tenneco exports to 20 countries, including Argentina, Brazil, the UK, and the US.

Tenneco's strength comes from its long-standing OEM relationships, built over decades with clients such as Maruti Suzuki (29 years), Tata Motors (28 years), Mahindra & Mahindra (27 years), Hyundai Motor India (18 years), and Ashok Leyland (17 years).

Revenue by Business Segments & Geography

Source: Tenneco RHP

The top 10 customers have been with Tenneco for an average of 19.2 years. However, customer concentration remains high, with the top 10 customers contributing 81.5% of revenue.

Business Segments

The business operates through two main segments.

1. Clean Air and Powertrain Solutions: This segment accounted for 57.5% of the company's total revenue. This business is heavily influenced by government policies and regulations related to emissions standards (like BS-VI), which mandate clean air systems.
   
   • Clean Air Solutions: This segment manufactures and sells exhaust aftertreatment systems, such as catalytic converters, mufflers, and related components. These products are used mainly in the ICE and vehicles.
   • Powertrain Solutions: This covers the businesses housed under its subsidiaries, including Federal-Mogul's ignition, bearings, and sealing operations in India. They are engaged in the manufacturing and trading of ignition products, engine and transmission bearings, gaskets, and heat shields.
   
   This segment is most exposed as the industry moves toward full electrification. Increasing EV penetration may reduce demand for ICE vehicles and consequently reduce demand for the segment's products.
   
   Any sharp decline could pose a significant threat to the company as a whole. That said, EV penetration is expected to be gradual. Therefore, the company is well-positioned to take advantage of future emission regulations such as BS7 and stricter Corporate Average Fuel Efficiency norms.
2. Advanced Ride Technologies: This segment focuses on suspension solutions, specifically the design, manufacture, and sale of shock absorbers, struts, and advanced suspension systems.
   
   These products improve vehicle comfort, ride quality, and handling by absorbing road shocks and vibrations. They are used in both passenger vehicles (PVs) and commercial vehicles (CVs), across both ICE vehicles and EVs - making it immune to electrification risk. This segment accounted for 42.5% of the total revenue in FY25.

In the end market, PV contributed 63.9% to revenue, followed by CV (22.8%), industrial/other (6.1%), aftermarket (4.9%), and other operating income (2.4%).

The industrial/other category includes revenue from small CVs (gross vehicle weight of less than 3.5 tons), two-wheelers, and three-wheelers.

Revenue by End Market (%)

Source: Tenneco RHP

The aftermarket, focused on replacement parts, provides a counter-cyclical revenue stream. Other operating income earns revenue from tool sales, sales of services, scrap sales, and export incentives.

Market Leadership Across Segments

The company is the market leader in key segments by value.

• It’s the largest supplier of shock absorbers and struts to Indian PV OEMs, with a 52% share.
• It’s also one of the top four suppliers of clean air solutions to PV OEMs, with a 19% share.
• Tenneco also holds a 57% market share in clean air solutions for Indian commercial truck OEMs.
• The company also has a 68% market share in off-highway (excluding tractors) clean air solutions.
• The company is a top 2 supplier for both PVs (44% market share) and CTs (34% market share) in the engine bearings category.
• In the sealings category for PVs, the company ranks as a top 7 supplier with a 14% market share.

Sona BLW Precision Forging

Sona BLW (Sona Comstar) offers high-precision, mission critical systems and components to leading OEMs worldwide. It maintains long-standing relationships with a diverse customer base globally.

The company counts among its customers seven of the world's top ten PV OEMs, three of the top ten CV OEMs, seven of the top ten tractor OEMs, three of the top ten EV OEMs, and three of India's top ten EV two-wheeler manufacturers.

Sona Comstar has a global presence with a wide manufacturing and R&D footprint in four countries (India, China, Mexico, and the US). The majority of its revenue comes from international markets (71%), with North America contributing 41%, followed by Europe (24%).

Revenue by Geography (%)

Source: Sona Comstar Annual Report (FY25)

The remainder comes from India (29%) and Asia (excluding India). While exports are growing, the company remains exposed to geopolitical risks like tariffs. So, it's diversifying to eastern markets, particularly India, China, Japan, and Korea.

Business Segments

The company offers 22 products across three technology verticals: driveline, motors, and sensors. The company has an 8.8% market share in the global differential gears business and a 4.4% market share in starter motors.

The revenue comes from a fairly balanced product mix. Differential gears contribute about 29% to revenue, followed by differential assemblies (27%), micro and plug-in hybrid starter motors (21%), conventional starter motors (9%), and the remaining 8% comes from traction motors and controllers.

Electrification is a revenue driver, with the share from Battery Electric Vehicles (BEV) reaching 36% in FY25, up from 29% in the previous year. The company's goal is to achieve 45% of revenue from EV-focused products by 2026.

Sona BLW Revenue from EV (%)

Source: Sona Comstar Annual Report (FY25)

The share of ICE-dependent products has declined from 18% in FY22 to just 9% in FY25. EV programs make up 77% of Sona Comstar's order book, placing the company firmly in the electrification-focused segment.

Sona Comstar is also diversifying into non-automotive segments. A major strategic move was the acquisition of the Railway Equipment Division from Escorts Kubota (transaction closed 1 June 2025).

This move offers true diversification, as the railway sector operates on different growth drivers than the automotive industry.

The company is also diversifying into new product verticals in fast-growing, emerging fields such as humanoid robots, eVTOL aircraft, and drones.

In the end-market, PV accounted for 71% of Sona revenue, followed by CVs (11%), electric two and three-wheelers (8%), non-automotive (9%), and semiconductors and others (1.3%).

Sona BLW Revenue by End Market (%)

Source: Sona Comstar Annual Report (FY25)

Tenneco Clean Air vs Sona BLW Financial Highlights

In financial performance, Sona BLW outperforms Tenneco in all departments.

Tenneco's revenue grew at a 0.6% CAGR from Rs 48.3 billion (bn) in FY23 to Rs 48.9 bn in FY25.

This slow growth is due to falling substrate prices (now 16% of raw material cost in FY25, down from 27.2% in FY23), and some OEMs switching to cheaper domestic suppliers. Note that substrates are ceramic filters coated with platinum, palladium, and rhodium that are at the core of emission-control systems.

Growth lagged far behind Sona BLW, whose revenue grew at 15.5% CAGR to Rs 35.5 bn during the same period. Sona's growth is being driven by its expanding share in global driveline programs, higher content per vehicle, and a steadily rising contribution from EV components.

Revenue (FY23-25)

Fluctuations in the prices of these metals often cause significant volatility in Tenneco's reported margins. With the decline in substrate prices, Tenneco's margin increased by 490 basis points to 16.7%.

However, Sona BLW's margin stands much higher at around 27.5%, nearly twice that of Tenneco, largely because its portfolio is concentrated in high-margin driveline and differential components.

EBITDA Margin

That is why Sona BLW's net profit grew at a faster CAGR of 24% to Rs 6 bn in FY25, whereas Tenneco's profit grew at a CAGR of 20.3% to Rs 5.5 bn.

Net Profit (FY23-25)

However, Tenneco leads in terms of return ratios, indicating a more capital-efficient business.

With the increase in net profit, Tenneco's return on capital employed (RoCE) has increased from 33.5% to 56.8% in FY25. Return on equity has also increased from 32.9% to 42.7%.

On the other hand, Sona BLW's RoE and RoCE have declined to 17.7% and 18.4%, respectively, due to Rs 24 bn fund raising through Qualified Institutional Placement in September last year.

Return Ratios

Source: Tenneco RHP

Looking ahead, Tenneco aims to adapt global technologies to enhance competitiveness, improve margins, and expand its "share of wallet" with customers.

It's looking to start domestic manufacturing of valving technologies, IROX bearings (a patented product of Tenneco Group), and ceramic components, which will increase margins and cost competitiveness.

The company also plans to increase exports, capitalise on the premiumisation trend and cross-sell to drive revenue growth.

Which Company is Better: Tenneco Clean Air or Sona BLW

Tenneco Clean Air and Sona BLW represent two different ways of participating in the auto-components investment opportunity.

Tenneco's business derives strength from its leadership in clean-air and suspension systems and the steady demand that will arise from future emission norms. It's capital-efficient, generates strong return ratios, and still has room to improve margins as localisation increases and exports scale up.

Sona BLW, meanwhile, is benefiting from rising electrification, a product mix that supports higher margins, and a growing diversification into non-automotive opportunities.

While its return ratios have moderated after the recent equity raise, the company is well positioned for long-term growth as EV programs scale up in India.

For investors, the choice ultimately depends on the preferred business model which demands a deep dive into the financials.

Instead of relying only on hype, it is necessary to carefully analyse the company's fundamentals, including financial performance, corporate governance practices, and growth prospects.

Happy investing.

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