Elgi Equipments ready for quantum leap as it eyes $1 billion revenue by 2023

Having registered 14.3 per cent growth over the last eight years, which includes a 30 per cent yearon-year growth in the US market, the company is readying itself for the quantum leap. It will pursue inorganic growth opportunities in the US and European markets, where it has identified acquisition opportunities that will give it better access to customers. The company, ready to inorganically invest Rs 1,200 crore in three years, will, however, maintain 1:1 debt-equity ratio. 

Having made three acquisitions in the last six years, it is keen to adopt a strategy that is based on its learning experience given that adopting the ‘Intel inside’ approach did not work. Rather than positioning itself as a local brand possessing superior technology in an increasingly connected world, the company prefers to access customers through distributor acquisitions, Elgi Equipments MD Jay Varadaraj said here on Wednesday. 

“We have the technology know-how. Our effort is to lay the foundation for next-gen technology and we will scout for acquisitions to help us in backward and forward integration. We are not looking at acquisitions in the core-compressor technology,” he sought to emphasise, explaining the competitive cost advantages. 

While the focus is to have a low-cost structure, Elgi Equipments is clear that it is not perceived as a “cheap” products maker. “We have spent four years on technology, process and people to build products that will give us the competitive edge,” Varadaraj said, noting that by using indigenous machine tools, they have saved one-tenth on machining costs. “We have 160 people in R&D, that constitutes 20 per cent of our white-collar employees. Though we invest 3 per cent of sales on R&D, effectively it works out to 10 per cent given the high-cost resources,” he said, adding the company engages close to 300 people overseas, mostly in Europe and America. 

Elgi Equipments is keen to design an assembly line that would maintain the total cost structure and generate enough volume (1,000 compressors annually) to enhance its presence in the two overseas locations.  

Varadaraj plans to reorient the automotive business, that generates around 10 per cent of the total revenue. The company has also rebranded itself using Brand Union agency for the makeover.