Coimbatore based ELGi Equipments, one of the world’s leading air-compressor manufacturers, with 2 million installations across 100 countries, offers a complete range of compressed air solutions from oil-lubricated and oil-free rotary screw compressors, oil-lubricated and oil-free reciprocating compressors and centrifugal compressors, to dryers, filters and downstream accessories. The company’s portfolio of over 400 products has found wide application across industries. Dr. Jairam Varadaraj, Managing Director, Elgi Equipments offered Shrikant Rao an understanding of the revolutionary oil free compressed air technology recently introduced by his company, his company’s plans for Europe and outlook for the future.
How have you taken Elgi Equipment’s motto ‘Always better’ to the next level during 2018-19? Give us an understanding of the company’s performance in the global and domestic air compressor market during this period?
Our focus is on compressors and build a global business for compressors. ‘Always Better’ for the customer as a stakeholder is about delivering a value proposition that is far superior to that of competitors. The value proposition for customers is about lowering their life cycle cost. Towards this our innovations on energy efficiency and oil free would significantly shift the needle. We are developing IoT based solutions that would reduce downtime. Today, global revenues are about 50 per cent of the total revenue of the company. In the past 10 years, this percentage has moved from less than 20 per cent to this level, even as we grew our domestic business. What this means is a significant traction in key global markets. It is important to highlight that we have gained this global traction in markets in developed countries where customer expectations are high and selling purely based on price will not enable any traction.
What are the products you have introduced to the market and the feedback they have received so far?
We have two types of introductions. Within category introductions wherein we introduce new models on existing platforms. We have introduced multiple products in this category, each of them significantly better on efficiency and quality than the predecessor products. Then we have new category introductions wherein a totally new platform is introduced. This is our AB Series. All of these introductions received very well in the market.
What are the current areas of construction and infrastructure which are driving your company’s business and other areas of opportunities you will be looking to seek?
The investment by the government in road, rail, ports and dams have created a trickle down demand for our products serving the construction industry. We are looking at building a global construction, mining, drilling related compressor business.
Recently at Comvac 2019 in Hannover Messe, Elgi Equipments introduced its revolutionary oil-free compressed air technology. Could you briefly dilate on it and other innovative technologies you plan to introduce and tell us how they will prove to be game changers in the world market? What kind of a market response have you received for the product?
Oil-free compressors are used in specialized applications and traditionally these compressors have been significantly less efficient than oil lubricated compressors and substantially more expensive to buy and maintain than oil lubricated compressors. What we have launched – Oil Free. Disrupted – is exactly this. We have disrupted the traditional norm that oil free compressors are less efficient and more expensive to buy and maintain. Our Always Better series of oil free compressors are significantly more efficient than conventional oil free compressors – almost close to oil lubricated compressors – and substantially more attractive financially to buy and maintain. We will continue to push the envelope on the AB Series so that we eventually merge the current distinction between oil lubricated and oil free compressors. Even as we do this, we continue to expand the boundaries of efficiencies across all of our compressors and we expect to be the best in class in energy efficiency very soon.
Could you talk of your specific plans to expand Elgi’s influence and business footprint in the global market, also acquisitions, more specifically your go to market strategy for Europe?
Within Europe we have identified sub-regions that we want to focus on. This is again using the principle of being focused in our approach. Till date in Europe, the focus has been primarily Italy and to a lesser extent France. We are now expanding this focus. Our major investment, if any, would be in the form of acquisition of distributors in Europe. This is not something we control fully as it takes two organisations to agree to come together. Besides this, our focus would be on building the talent required to execute our strategy.
What are your plans to expand manufacturing capacities at your plant in Coimbatore?
We invest in capacity based on medium term business goals and plan to have capacity in place at least one year in advance of the annual goal.
You have set your aspirations to become the No 2 air compressor company in the world by 2027. How close are you to achieving that target? Could you outline ELGi’s growth strategies for the future?
On the market facing dimension of strategy (where to play?) the focus is on specific product and market segments and go deep into specific countries. Rather than try to “boil the ocean” across all countries for all products and operate at a very veneer level. So for the initial phase, we are focusing on India, Europe, US, Australia, Indonesia and Thailand. On the value proposition dimension of strategy (how to win?), we are focusing on innovation centered around energy efficiency and oil-free and quality to be the best in the world.
What is your outlook for business going forward?
India seems to be going through some challenging times. With political uncertainty and the attendant tentative economic sentiments, there seems to be a “wait and watch” attitude among customers. We have to see how things pan out from June. Globally our traction continues to be strong. Even with slowing down of industrial activity in some of the strategic markets, since our market share is so low, there is still head room to grow.