“ELGi’s goal is to go deep into the compressed air segment
“ELGi’s goal is to go deep into the compressed air segment to address the customer’s unstated compressed air needs
ELGi, headquartered in Coimbatore, is one of the global leaders in the air compressors business and is currently the sixth-largest player in the world. The company offers a complete range of air compressor products, from oil-lubricated and oil-free reciprocating compressors, oil-lubricated and oil-free rotary screw compressors, and centrifugal compressors to dryers, filters, and downstream accessories. While its goal is to be one of the top three air compressor manufacturers globally, its strategy for growth in global markets has included both organic and inorganic initiatives, reveals Anvar Jay Varadaraj, Executive Director at Elgi Equipments Ltd. in an exclusive interview with Engineering Review. Excerpts:
Q. What’s your niche as a compressor manufacturer?
When we look at the overall air compressor industry, ELGi aims to cater to all core air compressor segments. Our product range encompasses small reciprocating air compressors to large centrifugal machines designed to meet high-capacity compressed air demands. We’re very competitive with the largest manufacturers in the world with a comprehensive range of compressed Air solutions. I would say our core competency lies notably within our lubricated screw and oil-free portfolios, and that’s purely because they tend to be the most global products, holding the highest opportunity for business due to the extensive market sizes, populations, and customer bases they serve.
Q. Tell us something about your standing and global presence.
ELGi is one of the global leaders in the air compressors business and is currently the sixth-largest player in the world. While our goal is to be one of the top three air compressor manufacturers globally, our strategy for growth in global markets has included both organic and inorganic initiatives. With our core market being India, we have expanded our global footprint by acquiring Rotair in Italy, Pattons Inc, Pattons Medical and Michigan Air Solutions in North America, Pulford Air & Gas, and Advanced Air Compressors in Australia. North America, Europe, India, Indonesia, Thailand, and Australia remain our focus markets, constituting nearly 90% of our revenue and 70% of the global opportunity. We will continue to invest in these markets to meet our long-term goals.
Q. What does your product portfolio look like?
As I mentioned earlier, ELGi is one of the few manufacturers to offer a complete range of air compressor products, from oil-lubricated and oil-free reciprocating compressors, oil-lubricated and oil-free rotary screw compressors, and centrifugal compressors to dryers, filters, and downstream accessories. Our goal is to go deep into the compressed air segment to address the customer’s unstated compressed air needs, and that’s what we focus on in terms of our product development.
Q. Your R & D is constantly working on new products and improvements on existing ones. Would you like to share details of a recent technological innovation which has brought tangible benefits to the end customer?
With all of our products, we aim to reduce the customer’s life cycle cost, and within the life cycle cost, we like to own the cost of energy, maintenance, and downtime. The cost of downtime is often not considered by customers when they purchase a machine; it is basically a loss in profit when the air compressor is not running. We focus on this area, and accordingly, we engineer and design for reliability under the toughest working conditions. In terms of technological innovations, we believe the entire category is moving towards oil free. In 2019, we launched our AB ‘Always Better’ series range of water-injected oil-free screw air compressors. What’s unique about this machine is that it improves the efficiency of traditional oil-free, improves reliability, and significantly reduces the upfront cost investment. So it allows customers who may not have been traditional oil-free customers to invest in this category. Additionally, oil-free is also an environmentally friendly proposition.
Q. How would you describe your manufacturing excellence – smart, lean, green, or all the three? Please elaborate.
What’s highly characteristic of our manufacturing is that it’s vertically integrated for quality and flexibility. We think about how to differentiate for our customers; our big focus is quality. We determined that the more elements of our manufacturing process we can control, the higher the chances of providing best-in-class quality. So we have our own foundry where we produce our castings. We make our own machines to build our Airends. We’ve invested in our own motor plant and a pressure vessel division, so our ability to control various aspects of the manufacturing process puts us in a place where we have really strong quality. Aside from that, we have lean manufacturing initiatives and self-managed teams. We won the Deming Award for Process Excellence, and we’re investing more and more in reducing our carbon footprint and moving towards resource-neutral operations. For example, to achieve our goal of reducing carbon intensity to 28% by 2026-2027, we’ve replaced traditional energy meters with smart meters at our manufacturing facilities; these meters detect loads based on amperage, and idle machinery, and distribute the load optimally. This has resulted in savings of about 1.5 million units of electricity per year. Additionally, we’ve implemented an Energy Management System (EnMS) at our Air Compressor Plant (ACP) with 145 IoT-enabled machines interconnected, enabling an improvement in energy consumption of approximately 24% in plant operations and energy savings of about 1.02 MW per year.
Q. What are the major strengths of ELGi, if you can summarize?
The most important differentiator for us is our razor-sharp focus on the customer, both in terms of understanding their immediate needs for products and services and also really thinking about what are the unsaid wants of the customer that we need to think about in terms of our long-term product development and product improvement. And so, being highly customer-centric and trusting what the customer wants is embedded in our DNA and is a core value proposition.
Q. Could you share some insights on ELGi’s values and culture?
About ten years ago, we started on our CK2 journey, which is to be amongst the top three compressed air manufacturers in the world, and that has become a powerful rallying cry for all of our employees globally to work together to drive success within the company. But it’s not just about the financial goals. We have our set of seven extremely important values that we adhere to, and every day our employees showcase the values in their actions. Quality, innovation, speed, cost prudence, integrity, sensitivity, and collaboration are the values we embody within the company’s culture.
Q. What’s your roadmap for ELGi, and where will the company be say five years hence?
We take our 12-year CK2 journey and plan in chunks of three years each. In FY23, we delivered sales and profitability as per the Annual Business Plan (ABP) goals, and we are well-placed to achieve the committed results outlined in our five-year Strategic Business Plan (SBP). Based on our FY23 performance, we have committed to revenue of INR 37,500 Mn with EBIDTA @ 16% and ROCE @ 30% for FY25-26. We’re moving along in our CK2 journey to be amongst the top three air compressor manufacturers globally.
On the performance side, from a people and employee perspective, we want to increase the number of people we promote and grow from within the company. From a product portfolio perspective, we want to increase our reputation as a leader in understanding customer needs and developing best-in-class products that address demands such as environment friendliness, air quality requirements, and increasingly stringent energy standards from a manufacturing perspective. We will focus on growing the complexity of our manufacturing base beyond just India. With key markets such as Europe and North America, I expect we’ll have a more profound and robust manufacturing footprint. If we succeed across all of these dimensions, we will have an even greater impact on society with an increase in our capacity to invest in CSR initiatives. We will be able to partner with the communities in which we operate to ensure that our carbon footprint is minimal and that we’re sensitive to the stakeholders we work with.
Q. What’s your success mantra?
At ELGi, we’re successful for two big reasons. At first, we have a clear goal, and we’re very steadfast in our goal, creating a remarkable sense of consistency and clarity within the company. Secondly, an incredible group of people drives our journey towards this goal. The key to our success mantra is the synergy between a robust goal and a team of highly motivated professionals.
I enjoy working with people, and I like seeing other people succeed. Making sure that we have the right people in the right roles with the right tools to be successful is what motivates me to come to work every day. And that’s one of the things that I focus on the most.