Positive about FY27 despite global shocks; demand strong

30 May 2026

As Coimbatore-based air compressor major Elgi Equipments grows in double digits in FY26, Managing Director Jairam Varadaraj said cost reductions and calibrated price hikes had helped the company drive profitability in a year marred by geopolitical crises.

In an interaction, Varadaraj said he anticipates rising input costs to weigh on FY27 performance, but stressed that customer demand remains intact.

“Our current inquiry levels are also very strong. We have some strong cost reduction projects that could absorb some of the potential shocks. So overall, I think it’s positive,” he said. He also flagged Chinese dumping as a key concern for the air compressor and wider manufacturing sector, urging the government to ensure a level-playing field.

Your revenue has grown 13 per cent, and profits by almost 23 per cent in FY26. What have been key drivers?

From a revenue point of view, biggest growth came from India and North America — these were the real growth engines for the top line. All regions grew except Australia, which was also flat. Profitability wise, I think the team has done a fantastic job of recovering from the tariffs and making sure that we didn’t let it impact us. It’s a combination of marginal price corrections and a significant reduction in cost that we have been able to achieve this. We were also hit by the crisis in West Asia. Fuel prices went up, and for some inexplicable reason, even metal commodity prices have gone up, but we anticipate the impact of that to be more in FY27.

What factors aided North America growth, despite the tariffs?

Mainly our commitment in the market and our go-to-market strategies. Second is we have also done some organisational changes to bring sharper focus to customers and distributors there. And that’s also helping. And we have a great line-up of products there.

What are your plans to manage the impact of the West Asia crisis?

The biggest uncertainty because of the West Asia crisis is the oil price, and I think the world is kind of coming to terms with living with high prices. Metal commodity prices have gone through the roof, and these are fundamental raw materials for us. And so, we need to moderate our plans between recovery of profit and not losing share in the market. But it is affecting everyone, so at some point, all the players have to adjust their prices or accept a loss.

Will more government support be needed?

I think we all have to work to be independent. The government has got enough priorities. But what the government can do is level the playing field. It is disproportionately loaded in favour of China today. There are a lot of Chinese products coming in that are just dumped into the market with no relevance to the actual cost of material. Along with efforts to conserve foreign exchange, promote Make in India, and other initiatives, I think the government should also take a look at the dumping that is happening from China. Not just for ELGi, but in the larger national interest.I’m not asking for protectionism, but talking about fair game.

Given all these factors, what is your outlook for FY27?

The first quarter looks good. Our current inquiry levels are also very strong. We have some strong cost reduction projects that could absorb some of these potential shocks. Overall, I think it’s positive. The West Asia impact is more on cost and not a Covid-like dislocation. Now that we have found a logistic channel to get our compressors into West Asia, we are growing our sales. The biggest thing we are trying to do is build agility within the company as well as layers of fallback options so that we still protect our growth trajectory and aspiration even while we face these kinds of uncertainty.

Are you still on track to achieve the goal you set for ELGi to become the third largest air compressor maker globally by 2035-36?

It is on track. Our growth rate is two-and-a-half to three times what the market is growing, which means we are gaining share in the market. Will we get there? Definitely we will. But our bigger challenge is to get there within that nine-year timeframe. So that means we are working on and exploring avenues for disproportionate growth rather than growth. It’s a combination of both organic as well as inorganic opportunity.

What’s your AI strategy and approach? Is it real today or hype?

Artificial intelligence is real. The biggest challenge for companies is to organise data. We need a coherent library of our data so that AI is able to pick up the data, make sense of it and then provide intelligence to us. It’s still some way to go, but I don’t think human beings are going to become redundant. What we will do is architect the company and the processes by which machines will do the brawn work and human beings will do brain work.