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We’re looking at Europe, US for inorganic growth to be No. 2 player globally: Jairam Varadaraj, MD, ELGi Equipments | INTERVIEW

R Ravichandran
Jairam Varadaraj, MD, ELGi Equipments

The over Rs 1,600-crore India s leading air compressor company ELGi Equipments is betting big on the global markets, particularly the European region, to become No. 2 company in the $15-billion air compressor market. The company is looking at both organic as well as inorganic growth, both in Europe and the US to increase its revenue from overseas market beyond 50% currently. In an interview, managing director Jairam Varadaraj tells R Ravichandran that the focus will be on global construction, mining and drilling-related compressor business. Edited excerpts:

How did you make it to global standards in the multi-billion dollar air compressor market?
From south India to all India and to the whole world, our focus has always been to build a global business for air compressors. Today, global revenues are about 50% of the total revenue of the company. In the past 10 years, this percentage has moved from less than 20%, 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 where selling purely based on price will not enable any traction. Our value proposition for customers has been about lowering the lifecycle cost. Towards this, our innovations on energy efficiency and oil free compressors would significantly shift the needle.

Considering Europe has been the biggest market for air compressors, how are you going to tap this huge potential?
Till date in Europe, the focus has been primarily Italy and to a lesser extent France. We are now expanding this focus. Within Europe, we have identified sub-regions that we want to focus on. This is again using the principles of being focused in our approach. 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.

What is the air compressor industry size globally and your current positioning, aspirations?
The air compressor market is growing steadily year-on-year. Indian air compressor market is estimated at $600 million and expected to touch $1 billion in the next few years and the global market is about $15 billion, which is also equally growing fast. We are currently placed at No. 7 globally and we aspire to be the No. 2 in the global air compressor business. Over the last decade, we have been recording a strong, double-digit, upward trending CAGR, well above the industry growth rate of 2.5-3%. To accomplish our aspirational targets, our strategy will include, in addition to organic growth, business acquisitions across the world. We re expecting Europe and the US to be major markets, the acquisitions will also happen in those two geographies, mostly for scale and customer access.

What is your overall growth plans/strategy/investments/acquisitions both in India and abroad?
Innovation is a central pillar to our strategy. 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. Investment by the government in road, rail, ports and dams has created a trickle-down demand for our products serving the construction industry. We are looking at building a global construction, mining and drilling-related compressor business. 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. Our major investment, if any, would be in the form of acquisition of distributors.

Any new products on the pipeline?
We have introduced a revolutionary oil free compressed air technology at the recently held Hannover Comvac 2019. Oil-free compressors are used in specialised applications and traditionally, these compressors have been significantly less efficient that oil lubricated compressors and substantially more expensive to buy and maintain than oil lubricated compressors. Our AB (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. Besides these, we have been involved in developing IoT (internet of Things)-based solutions that would reduce downtime, which is another big element in the lifecycle cost for customers.