Long admired as financial wizards, private-equity firms today face an existential question. Is their model broken as exits dry up?

Globally, PE has underperformed the S&P 500 index over one, three, and five years, according to the consultancy McKinsey.

If they are viewed as a money trap in developed markets, in India this investor class is emerging as squeezers, extracting the utmost value from their portfolio companies before they go public, leaving very little on the table for public investors.

But Tenneco Clean Air’s IPO last week bucked the trend.

The auto-components company listed at a nearly 27% premium when many PE-backed Indian companies have had weak stock market debuts. The conservatively priced issue of Rs 3,600 crore was entirely an offer-for-sale by promoters and was lapped up by anchor investors. As Axis Capital managing director Ashish Nigam said during the opening ceremony, “It’s the hottest auto IPO in a long time…the anchor book was oversubscribed 170X”. (Earlier in November, Lenskart’s anchor book was oversubscribed 20X.)

The US parent, Tenneco Group, is owned by the New York-based asset management behemoth Apollo Global Management. That a fund-backed American automotive-components company chose to unlock value on Indian bourses in this manner makes for an inadvertent contrast with Korean automaker Hyundai’s IPO in 2024. The latter dropped 7% on debut, despite high ratings from many brokerages.

Now, compare this to another auto-ancillary company Sona Comstar, which went public in mid-2021. It didn’t have a stellar listing because it was “aggressively priced” (at a P/E multiple of 79 compared to Tenneco’s 29)—courtesy of, you guessed it, its PE backer Blackstone. More than four years later, the share price has appreciated by 75% since its listing but is still well below the peak the stock reached just six months after going public.

The promoter group, led by Blackstone, has significantly pared its shareholding in Sona Comstar, but it’s still the largest shareholder. Whether it stays invested for long or not, the auto-components story is looking snazzy. And Tenneco’s playbook is one Sona and others may want to study as auto markets turn volatile worldwide.

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Most automakers are looking to make India an export hub—from Maruti Suzuki and Mahindra & Mahindra to Volkswagen and Hyundai Motors. In an interview with Mint, Ashish Gupta, brand director at Skoda India, the marquee brand of the Volkswagen Group in the country, noted that exports from India are playing a key role in Indian and global automakers’ growth stories—with some of the biggest opportunities for exports being in the Global South.