29 May 2020

Table of Contents for Equipment Sphere

Interaction- Dr Jairam Varadaraj, MD, ELGI Equipments

We have proven that the customers will accept the unknown brand


Elgi Equipments Limited is a leading air compressor manufacturer with a broad line of innovative and technologically superior compressed air systems. ELGi has earned worldwide distinction for designing sustainable solutions that help companies achieve their productivity goals and keep the cost of ownership low. In an exclusive interaction with CONSTRUCTION OPPORTUNITIES, DR JAIRAM VARADARAJ, MD, ELGI EQUIPMENTS speaks about the recent acquisition, the demand drivers for compressors, fighting competition and a lot more.



You have recently acquired Australia-based F R Pulford & Son Pty along with its wholly-owned subsidiary Advanced Air Compressors. Tell us more about this development.


With F R Pulford & Son Pty, our acquisition strategy is not to acquire other manufacturers. We have the technology and the ability to manufacture. We do not want to acquire any other brand and are in fact happy with our own Elgi brand. We have proven that in America and in Europe where we have taken the brand and have run for over five years. We have proven that the customers will accept the unknown brand. So our acquisition strategy is to acquire companies that give us access to our customers. This will add the distribution and increase the sales. 




Tell us of the portfolio of compressor products you offer for the building environment – infrastructure/ construction /construction equipment/ mining space, their areas of application (for eg cement plants, petrol pumps, oil rigs etc) and the demand driving areas for each of those?


Our main competitor is electricity and not some other brand. In our view, almost 80-85 per cent of the companies need air compressors.



Whether it is construction or mining and related industries, the demand depends on the amount of workload increased on the projects and works related to that sector. People are coming out of the dilemma over adding the capacity for the production. The demand drivers are primarily the impetus on the sector for the projects. 




What distinguishes your products vis-a-vis the competition? What is your current market share in all your product categories?


In India, we have been there for over five decades. So, the brand is known. Hence selling the brand here is not much of a challenge for us. The challenge in India is that we find a greater acceptance in an American brand than Elgi. Indian people tend to have a soft corner towards foreign products. This has been the trend since the license raj. We need to do things in a better way to cater to the demand.


For the compressors, the prime factor is the energy consumption. The upfront cost is energy consumption. We believe that we produce more energy efficient compressors than any other. Then there are other aspects such as price and distribution.




Our global challenge, because we are not much known globally is to have the right distributor.


In Asian markets, customers buy on brands. In the other markets, customers generally buy on relations. Hence I feel that the biggest challenge for us is to convince the distributor to tell his customers that we are the best. We make the most reliable product. The customers trust the distributors in the west. That is why we have grown exponentially in the western world - especially the US and Europe. It is all about the relations.




How has your growth been in the Asian market?


In the Asian market, we are having bigger challenges. Our growth in the US and the Europe has been far higher than in the Indonesian or Thailand market. In most of the Asian markets, the distributors are not the main sources of sales. It is the end customer in fact. We have to go to the customer directly. So we have to make a mark there with the customers.




With the growing trends of embedding the concept of smart technology, tell us about the smart technology featured in your products.


The whole idea of connected devices and connected people is changing. The need is to make the product respond to that kind of change and that kind of technology. Making this happen is not much of a rocket science. But, the main question is about converting this technology into a value to the customer. .




Could you offer statistics of the demand for air compressor solutions and the gap that your organisation is looking to fill both in the domestic and export markets? 


Today, the business that we do is kind of 50-50. Half of it is in India and the rest is the globe. Out of the international business that we do, 75 per cent comes from the business in Europe alone. We expect that will continue to increase. US is another major market for us. We have made a detailed plan for the next 9-10 years. There is a lot of traction and lot of preparatory work. In that period, we expect a growth of 15-18 per cent for the initial stage. It can be high as well. We are confident that we will make that happen. This is on the revenue side.


Similarly we are developing the ratio of the investors demands to the profit that is expected that will be achieved. It is about understanding the long term investments that will help us grow and how do we fulfill the expectations to reach the top.

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