Buoyed with earning worldwide distinction for designing sustainable air compressor solutions that help manufacturing companies achieve their productivity goals and keep the cost of ownership low, ElgiEquipments Limited has recast its plan to become world number two in the global market.
The Coimbatore-based company, a leading air compressor manufacturer with a broad line of innovative and technologically superior compressed air systems, hopes to achieve this gargantuan task in 10 years. It plans to record a revenue of about $1 billion in the next five years. The $230-million company is currently the eighth largest player in the $15-billion global air compressor market. It gets equal amount of revenue from the domestic and export markets.
The air compressor market is growing steadily year on year and the market size is expected to be $20 billion in 2023, with 3.6 percent CAGR. At present the $5.5 billion Atlas Copco is the market leader, followed by Ingersoll Rand with total sales of $1.8 billion. Other big players are not very strong in fundamentals like technology and manufacturing. “Elgi has the full range of compressor products and that gives us the right to play aggressively. We have opted to take the innovation route to be world number two in the global air compressor market by making the products energy efficient, oil-free and with an increased uptime reliability,” JairamVaradaraj, Managing Director, Elgi Equipment, said.
Elgi’s growth plans envisage an investment of Rs 5,000 crore over the next 10 years. It plans to pump in Rs 1,000 to Rs 1,200 crore in the next three years and these will primarily go into building back-end infrastructure in order to achieve $1 billion revenue in the next five years. However, it will be cautious to maintain a debt equity ratio of 11, he pointed out.
In order to become the world number two the company has rolled out a concept called ‘Conquer K2.’ As is known K2 is the second highest mountain in the world, after Mount Everest, at 8,611 metres, located on the China-Pakistan border. It is also known as the savage mountain due to the extreme difficulty in ascent. ‘Conquer K2’ by Elgi is to make the company conquer the number two position in the world in 10 years. While agreeing that achieving the task is like climbing K2, Varadaraj is confident as the company has strong fundamentals evolved consistently over the years. Elgi has three manufacturing units located in India, Italy and the US and has business presence across 70 plus countries including 18 countries with direct presence. The company has been growing at a CAGR of 14.3 percent during the last eight years against the industry growth rate of 2.5 to three percent. The company will look at the organic route, while it will continue to bet big on its strong fundamentals. “From the current level to reach our targets, we need to grow at a CAGR of about 28 percent. This will not come organically. A big part of that growth, say up to 70 percent, will come through acquired businesses,” he said.
Elgi has already acquired three companies. Europe and the US continue to be its major overseas markets and therefore, a major portion of its acquisitions will be from there, he said. It has identified about 25 companies having potential to be acquired, mostly for scale and customer access, in these two regions. As part of its plan, the company is also looking at options to set up local manufacturing facilities in other countries. The first overseas assembly plant may come up in the US, he indicated. The criterion is to set up an assembly plant in a country if the sales there exceed a minimum of 1,000 units a year.
Varadaraj said to achieve this goal of climbing to the second position globally, the company has been working since a few years. The foundation for this was laid in 1994 when the company began to focus on developing its own technology – not only to make new generation products but also those machines that help Elgi manufacture its products. The company has been focusing on developing and investing in technologies to make machines that can produce products at a highly competitive cost. Besides, it banks on standardisation to help optimise productivity and also after-sales service.
The company has adopted Elgi Manufacturing System (EMS), a customised lean management system, leading it to consistent productivity gains, quality improvements, on-time delivery and significant reduction in inventory. The delivery of better quality products with reduced time-to-market has positively impacted customer satisfaction levels.
ELGi has through the decades maintained a technological edge in the air compressor market with incremental and breakthrough innovation, through incorporation of latest technologies in its products. For instance the inlet tubes in compressors are generally made of plastics by other players while Elgi has deployed metal tubes. The company has been carefully putting its building blocks to reach international quality standards. It did not compromise on price as it does not want to get the ‘cheap product’ stigma to its products.
“Elgi, as a more than 50-year old brand, has evolved to a global leader in providing complete range of compressed air solutions having satisfied customersacrossall industrial verticals. Air compressors are the ‘life source of all industries’ and the need will never diminish. With our best-in-class lifecycle cost driven by low specific power consumption and maintenance cost, we strive to run all manufacturing facilities across the world with Elgi compressors,” he said.
Elgi has been focusing on strengthening its attention on indigenous technology, research and development to innovate technologies in the air compressor industry. The company 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 applications across industries.
Elgi’s research and development division has 160 engineers, almost equal to 20 percent of its white collar employees. The company has been spending around three percent of its sales on R&D and this has helped in bringing innovative products that can help its customers optimise their cost of ownership and operating cost.
The company has invested in advanced tools, such as state-of-the-art simulation software, for design and manufacturing. Simulation software helps in setting up virtual real-world environments where product designs can be tested prior to manufacturing. It lowers costs and reduces time-to-market by bringing down the number of physical prototypes before actual production. Simulation software has helped its designers and engineers to innovate, test and develop newer concepts with better insights. It is being used for the design optimization of screw-profiles, shafts, bearings, gears etc.
Elgi is one of the five companies globally that designs and develops two-stage oil-free screw air compressors. Its proprietary air-end design with large rotors running at low speeds help maximise volumetric efficiency. It has established its own captive foundry to get high quality castings and is supported with custom designed and built machining centres. The company’s flexible design offers its customers options to retrofit VFD (variable frequency drive) for EG and OF category of screw compressors, that optimises power based on varying demand patterns. In addition, the compressors from the company offer up to 80 percent savings on air-ends due to serviceable air-ends.
With digitalisation engulfing manufacturing activities across the globe, the manufacturing companies are looking at making their operations smart with options to connect their machines via internet. As part of its planElgi is also planning to launch IoT-enabled compressors as a standard feature in its products, while most of its competitors offer the same as an option, he said. Towards this the company has established a contract with Vodafone.
Elgi has also unveiled its new brand identity with a new logo and colour scheme for its entire product range. Red and Black are more distinct and dynamic than orange and grey. Red stands for performance, passion and energy. It reflects the drive to constantly evolve and keep getting better. Black is clear, bold and helps establish a distinct brand world. From the functional stand-point, these colours add on to better visibility, consistency in execution and are unique in the industry.