ELGi Equipments eyes No. 2 spot

This Coimbatore-based company believes there is anopportunity to become the No. 2 player globally in air compressors and is currently lining up its strategy to get there.

A recent report by an analyst stated that the air compressors market is anticipated to grow to US$ 20 billion in 2023, at 3.6 per cent CAGR from 2016 to 2023. While Stockholm, Sweden-based Atlas Capco is the undisputed leader globally, there is a big gap to be filled to become number two in this segment.

Jairam Varadarajan, Managing Director, Coimbatore-based Elgi Equipments, believes that is a huge opportunity area for the company. “A 20 percent -30 per cent gap between the first and second slots is normal. But there is almost a 60 per cent gap, and this gives us an opportunity to aim for the No 2 slot by 2027,” he says.

To go with this vision and be viewed as a global company, Elgi also unveiled their new brand identity with a new logo and color scheme for its entire product range.

 “An organization reaches the top when the business is built on sound fundamentals – cutting edge technology, products that are built on this technology, a strong presence in the market through organic and inorganic growth, organizational processes that align the company towards efficiencies, and a strong team,” explains Varadarajan. In the air compressors business, he believes only the market leader – Atlas Copco – has done these things right. Most others run their businesses as dictated by the balance sheet, he suggests, and believes that Elgi – a 50-year-old company, is uniquely poised to race ahead.

Ready for the Challenge

It is not an idle aspiration, but arrived at after deep evaluation, as can be expected of a well-established organization.  “In the last 20 years, we have built technology that answers the need of the hour,” says Varadarajan. Power consumption is one of the biggest costs for users and Elgi expects to release a product that will lower power consumption in one and a half years.

The second area of innovation is in the nature of the pumps. Typically, there are two types – those that are lubricated and those that are oil free. The lubricated variety are efficient and less expensive while the oil-free are less efficient and more expensive. Each has its uses and niche customer base. The oil-free, for instance, is popular in the food processor, textile and pharma industries.

“We believe, however, that it need not be a choice between one or the other but can have the advantages of both,” opines Varadarajan. And with that in mind, it has released oil-free, cost effective and efficient pumps.

Innovation and research and development form an important part of the company’s DNA, with three per cent of its revenues being invested in technology and product development. “It seems low because Indian labour is cheap. For the kind of work that gets done here, globally, it would translate to eight per cent,” he adds.

Strengthening Market Presence

There have been short term setbacks caused by events such as demonetization and increasing protectionism in different countries. But Varadarajan believes that having a direct presence will help overcome that challenge. “One of the challenges is also the absence of any benchmarks to build a global organization. As a nation, we need to evolve and create those standards,” he says.

Nearly 50 per cent of the company’s revenues come from India, where Elgi is a close second, and the remaining 50 comes from rest of the world. “However, the air compressors market in India is only three to four per cent, so having a large market share here means little. We will have to strengthen our presence globally to achieve our goal,” Varadarajan says realistically. Europe and the U.S. contribute 60 per cent of its revenues from international markets and will continue to remain an area of focus, apart from Asia and Africa. In Asia, China is a significant contributor.

Elgi products are already well received there and this validates their aspirations to win in these markets. The next few months will see the company detail out its sales and marketing strategy, pick areas where they want to do better, assess the specialized products and markets they should focus on. “We can’t expect to achieve our dream through organic growth alone and will be looking at inorganic growth as well, through acquisitions,” said Varadarajan.

The company is also targeting a 28 per cent CAGR in the coming years as against 14 per cent in the past and touch revenue of US $1 billion in five year’s time from the current revenue of around US $230 million.

Quick Facts:

  • 3 Manufacturing Units
  • Business presence across 70+ countries
  • 18 countries with direct presence
  • 3 manufacturing countries
  • 400+ compressed air systems
  • 1500 employees

What Next

  • Targeting No. 2 position by 2027
  • A revenue of US $1 billion in 5 years, from the current US $230 million
  • Increase revenue share from international markets

Milestones:

1960: Elgi Equipments Limited incorporated. Manufactures air compressors and garage equipment.

1975: Becomes public limited company

1983 – 88: Indigenizes the manufacture of rotary screw compressors

1990: Develops -rotary screw type vacuum exhausters, high-pressure compressors for naval applications, bore well compressors

 1997: ELGi awarded with ISO 9001 certification by TUV

1999: ELGi launches Horizon series of rotary screw air compressors

2000: Introduces Six Sigma, TPM, Baan ERP and other quality measures; new generation of oil-free screw air compressors; Airmate line of downstream accessories

2002: Develops the world’s smallest screw air compressor. Becomes a debt free company

2003: Launches tank mounted rotary screw compressors

2005: Manufacturing and engineering division commences operations to manufacture precision engineered components

2007: Spins off ATS ELGI LIMITED (dedicated unit for manufacturing automotive service equipment ) as wholly owned subsidiary

2008: Opens Warehouse facility in the Middle-East

2009: Opens Warehouse facility in Brazil and Global Support Centre in India

2011: Launches first Oil-free screw air compressor

2012: Launches compact, silent and energy efficient EN Series screw air compressors

         : Acquires Italy based Rotair S.P.A, US based Patton’s Inc. and opens its subsidiary and country offices at Australia and Thailand

2013: ELGi opens its subsidiary office at Indonesia

2014:ELGi expands its manufacturing facility by opening up its best-in class Air Center Plant and Foundry in India

Opens its regional office at Malaysia

Launches Portable Screw Air Compressors:

2015: Launches Portable Screw Air Compressors, Oil-Free Reciprocating compressor suitable for applications that need oil-free air, high pressure reciprocating air compressor suitable for PET Bottle making

2017:  Announces new brand identity and Launches products with new Logo and brand colors

Meera Srikant has been working with publishers and publications since 1993, writing and editing articles, features and stories across topics. She also blogs and writes poems, novels and short stories during leisure. Writing for The Smart CEO since 2010, she is also a classical dancer.