ELGi is heading to be world’s favorite Compressor maker
09 June 2022
ELGi, a pioneer in cutting-edge compressed air technology across over 120+ countries, offers a complete range of compressed air solutions from oil-lubricated and oil-free rotary screw compressors, oil-lubricated and oil-lubricated oilfree reciprocating compressors and centrifugal compressors to dryers, filters, and downstream accessories. With state-of-the-art manufacturing units and a product portfolio of 400+ compressed air systems, ELGi redefines reliability, efficiency, and cost-effectiveness across 2+ million installations worldwide. Dr. Jairam Varadaraj, Managing Director, ELGi Equipments speaks to OEM Update on ELGi’s growth as a significant global player among compressors makers.
How were the last few years for your business?
We grew close to 30 percent last year. But that is a bit of an illusion, because the year before was Covid year; so we did great compared to a pretty average yield. But, if you look deeper into that performance, rather than that 30 percent. You will see that we have gained sales globally in all markets, which is a very important thing to be able to sustain that kind of momentum. We have really got strong traction in some of the most developed markets in the world. If you look at our revenue, 50% is from India and out of the balance 50%, close to 43% is from Europe and America. We are really playing where the big guys are playing right and we are playing repetitively. The important thing is the same customers and same distributors are repeating their purchase with us. Which means there is a very high levels of confidence and faith in our product in our people and in the company. It’s the same journey for us in many of these developed markets. And the interesting thing is, we’ve done this over the last 12 years. So it’s not just the last couple of years. Now we are beginning to see a very strong traction in all these markets, which is a very positive thing. We are no longer just relying on India because India is one economy. You could have any kind of variations in the economy and risks associated by diversifying ourselves. I think we are reducing the overall risk footprint of the company. Besides those markets are 10x 20x bigger than India. So our opportunity for growth is also more now moving forward into the future.
How are you prepared to meet global demand as an Indian company?
In 1992, when we really started our journey and said we want to be a global player. We took the list of the top 100 companies and we were not even in that 100! Today we are number six, which means we have crept in from nothing to number 6! This did not happen by accident. we’re going to continue down that same trajectory. We are saying by 2035, we will be in the top three.
Our philosophy is to invest one year ahead of our requirements. But for me, a global company is a company which can operate anywhere in the world and still be competitive. You have to be independent of any country. For us, that transformation in manufacturing is to be able to raise the salary of a blue collar employee to the level that is there in Europe and America and still be competitive. It gives us two things. One of principle is we don’t want to build a company on the back of cheap Indian make image. We want the Indians to be expensive and still be successful for; more efficient products at a much lower maintenance costs. This is something as big of an issue right from the beginning. Even our earlier generation was even more frugal than the current generation. So, we are used to like we have been doing this for a living for the last 50 years. So this is in our DNA. We have to be very frugal, but an Indian company with global aspirations cannot make mediocre products and expect to sell them. So what we are bringing is very frugal innovation, but with a world class standards. That is really our difference.
How the range of products offers energy efficiency edge?
Energy efficiency is a growing concern across the industry. Our customers are challenged by ever-increasing electricity costs, fluctuating market demand, and limited industrial floor space, causing them to look at competitive compressed air solutions that offer a lower total cost of ownership. Our technology teams endeavour every day to transform conventional compressor technology. The LD series range of 3HP to 15 HP direct-drive reciprocating air compressors equip our customers with the key benefits of high energy efficiency, industry-leading reliability, low noise and ease of maintenance.
What kind of challenges emerged in the post Covid era for your business?
If you see in 2021 and 2022, the large economies of the world spent a lot of money in various types of stimulus. They put money directly in the hands of people for consumption. So the Covid period was consumption led recovery. Now that stimulus has been stopped. There is no more stimulus that has to have a trickle down impact in the market. We are waiting for that to see what will be that impact, in two years. There was no spending on vacation, travel, restaurants eating out all that money was spent on physical products. Whether it’s a second cell phone, a second laptop, an exercise machine at home, whatever it was also so the product demand went up. And you saw the supply constraint and the demand went up. Now travel and other spending is back. Which means that money will also get diverted to other heads. The third one is, inflation all over the world, and we don’t know how it is going to get managed. And fourth, of course, is the Ukraine war. So if you put all of these four factors together is not a very positive optimistic situation. We have got to be prepared for it. We’ve got and we are tightening our belts. We are cautiously tightening our will not letting go of opportunities but at the same time everything looks good.
From September 2020 onwards, the prices started going up. Commodity prices like steel, copper, aluminium, you touch anything, it was expensive, so we started a program for cost compression at the variable cost level and this program is still going on. And, it’s been quite successful. So that partly helped mitigate. The supply chain problems are affecting everyone today. But, I believe our company and our team, especially in the factory here does an outstanding job of making sure that our availability was the best in the industry. Probably some of our business came because we were ready with the products, more readily available compared to the competitors.
How do you assess your manufacturing strategy?
I think we are world class when it comes to manufacturing facilities. We are very deliberate about the point, I said about how to make Indian now if you want to make Indians expensive somewhere else you need to take cost out. Right and we use our brains and our engineering capability to build machines that we would have otherwise bought, right normally in our machine to do some of them other machines we save close to 80% of the capital. So that’s a big thing. If you look at our past, we acquired small companies, and the strategy at that time was to downplay ELGi brand. But soon, there was a disconnect created in the market. We realise that we are better off selling under the brand ELGi.