Tenneco H1 revenue grows 27.2% as EBITDA margin narrows

Tenneco’s H1 FY'27 revenue from operations rose 27.2% year on year to Rs 3,263.1 crore, while its earnings before interest, tax, depreciation and amortisation (EBITDA) margin on Value Added Revenue (VAR) declined 172 basis points to 17.5%. Higher volumes and new programme wins lifted revenue, but commodity and geopolitical cost pressures, plus listed-entity costs, coincided with lower EBITDA and profit after tax (PAT) margins. A prior-year Motocare interest item also affected reported PAT growth.

How fast did Tenneco’s H1 FY'27 revenue grow?

Tenneco’s revenue from operations rose 27.2% year on year to Rs 3,263.1 crore in the first half (H1) of FY'27, from Rs 2,566.3 crore in H1 FY'26. The increase was Rs 696.8 crore, and reported revenue growth exceeded the 25.3% increase in VAR during the same period.

VAR, which excludes pass-through substrate costs from revenue from operations, increased to Rs 2,904.4 crore in H1 FY'27 from Rs 2,318.1 crore a year earlier. Tenneco uses VAR as its primary operating measure because it says removing substrate costs better reflects underlying operating performance, margins and comparability. Volumes grew 20.7% year on year in H1 FY'27, while industry volumes increased 21.4%, according to the presentation.

Why did Tenneco’s revenue growth exceed VAR growth?

Tenneco’s reported revenue grew 27.2% in H1 FY'27, compared with 25.3% for VAR, because the two measures treat substrate costs differently. Revenue from operations includes pass-through substrate costs, whereas VAR excludes them. This distinction is relevant when comparing the Rs 3,263.1 crore reported-revenue total with the Rs 2,904.4 crore VAR total.

Tenneco attributed the 25.3% VAR increase to higher volumes and new programme wins. In the second quarter (Q2) of FY'27, VAR grew 32.2% year on year to Rs 1,522.9 crore, while revenue from operations increased 34.2% to Rs 1,718.3 crore. The Q2 growth rates were higher than the corresponding H1 rates.

How did Tenneco’s H1 FY'27 operating margin change?

Tenneco’s EBITDA margin declined to 17.5% of VAR in H1 FY'27 from 19.2% in H1 FY'26, a contraction of 172 basis points. EBITDA nevertheless rose 14.1% to Rs 508.5 crore from Rs 445.7 crore, meaning operating profit increased in rupee terms but more slowly than VAR, which grew 25.3%.

Tenneco said P3 operating-model efficiency improvements, better fixed-cost absorption and commercial actions supported the Rs 62.8 crore year-on-year EBITDA increase. It also said productivity gains, commercial discipline and operational execution partly offset commodity headwinds and costs associated with becoming a listed entity. In Q2 FY'27, the EBITDA margin was 17.2%, below both the 17.5% H1 level and the 18.8% reported for Q2 FY'26.

The quarterly figures show that margin movement also occurred within FY'27. EBITDA margin declined from 17.9% in Q1 FY'27 to 17.2% in Q2 FY'27, even as EBITDA rose from Rs 246.9 crore to Rs 261.6 crore. Tenneco linked the Q2 EBITDA increase to topline growth and operating efficiencies, partly offset by geopolitical cost pressures and incremental listed-entity administrative costs.

Why did Tenneco’s PAT rise only 6.2% in H1 FY'27?

Tenneco’s PAT increased 6.2% year on year to Rs 338.6 crore in H1 FY'27 from Rs 318.8 crore, while its PAT margin declined to 11.7% of VAR from 13.8%. Reported PAT growth was below EBITDA growth of 14.1% and VAR growth of 25.3%.

The H1 FY'26 comparator included Rs 25.4 crore of one-time, net-of-tax interest income related to the Motocare entity sale. Excluding that item, Tenneco said H1 FY'27 PAT growth would have been about 15.4%, rather than the reported 6.2%. The adjustment explains part of the difference between reported PAT growth and operating earnings growth, but does not change the reported 209-basis-point decline in PAT margin.

The same comparison affected Q2 results. Q2 FY'27 PAT rose 15.0% to Rs 173.4 crore from Rs 150.7 crore in Q2 FY'26, which included Rs 6.7 crore of net-of-tax Motocare-related interest income. Tenneco said Q2 PAT growth excluding that earlier one-off item was 20.4%, while the Q2 PAT margin declined from 13.1% to 11.4%.

What do Tenneco’s cash generation and order book show?

Tenneco reported free-cash-flow-to-EBITDA conversion of 69% in H1 FY'27, compared with 50% in Q2 FY'27, and said it remained net debt free during the half year. Its net-debt-to-equity ratio was negative 0.57 in H1 FY'27, compared with negative 0.38 in H1 FY'26, while net working-capital days excluding cash improved to negative 11 from negative five.

Tenneco’s order book stood at about Rs 16,500 crore, including export orders of about Rs 875 crore. Management said the total order book covers more than 100% of its FY'30 revenue target and underpins a healthy double-digit compound annual growth rate from FY'25 to FY'30. This is management’s stated measure of revenue visibility, not a guarantee of future revenue or margins.

Market-share data showed differing trends through H1 FY'27. Clean Air Solutions for commercial trucks reached 59%, up from 57% in FY'25 and 58% in FY'26, while shock absorbers and struts for passenger vehicles held at 55%, versus 52% in FY'25. Clean Air Solutions for passenger vehicles moved to 18% in H1 FY'27 from 19% in both FY'25 and FY'26.

Conclusion

Tenneco delivered substantial H1 FY'27 revenue and VAR growth, with revenue increasing Rs 696.8 crore and EBITDA rising Rs 62.8 crore year on year. Growth rates diverged, however: VAR rose 25.3%, EBITDA rose 14.1% and reported PAT rose 6.2%, while EBITDA and PAT margins declined to 17.5% and 11.7%, respectively. The Motocare-related interest income in H1 FY'26 also made the reported PAT comparison less representative of underlying operating progress.

The next measures to watch are whether the P3 operating model, fixed-cost absorption and commercial actions can offset the commodity, geopolitical and listed-entity cost pressures identified by management. Tenneco has said its approximately Rs 16,500 crore order book supports more than 100% of its FY'30 revenue target, and execution of new programme wins, including about Rs 875 crore of export orders, remains relevant to that plan.