Elgi's 'technology with lowest lifecycle cost'

Dr. Jairam Varadaraj,
Managing Director,
Elgi Equipments

Dr. Jairam Varadaraj, Managing Director, Elgi Equipments informs about air compressor market and Elgi Equipment's market presence, latest technology, Customer Experience Program for aftermarket services and the company's presence in the next two years.

“Always be the choice everywhere” with this vision in mind Elgi Equipments established itself as a major air compressor and garage equipment manufacturing company. With its expertise, today the company is one of the largest players in providing compressed air solutions in all segments and automotive service equipment for garage, but is also well known for its reliability of its products technologies and manufacturing capabilities which have helped them to have steady growth in the years and is now poised for the next level of growth that will boost the company into being a major global player.

Outlook on air compressor market and Elgi Equipment's market presence
"The global business for air compressor which includes industrial, construction, mining, products and aftermarket is about 15 billion that is the size of the market worldwide. India would be approximately 600 to 650 million depending upon how the economy is doing. India represents approximately 4 to 4 and a half per cent of the global market. For example, if I split that 15 billion the industrial side would be 13 and a half to 14 billion and the construction and mining would be 1 to 1 and a half billion that is the size of the market," informs Dr. Jairam Varadaraj, Managing Director, Elgi Equipments.

Sharing about Elgi Equipments space in the same air compressor market Varadaraj says, “Our presence in India is pretty strong for both the industrial as well as for the construction and mining. It is very difficult to say what the share of the market is but I would say that our share in the neighborhood is around 30 per cent in India.”
If one compares Elgi Equipment's presence in Indian market and its market presence in the US, today it has 30 per cent market share in India where the company have 60 distributors, close to 250 sales and service engineers.
Sharing his views on Elgi Equipment's benchmarking presence in India, Varadaraj says, “The network of going to the market and meeting customers is very significant. If compared that to the US, we cannot commit this kind of infrastructure without validating hypothesis. We have been doing this hypothesis which is tested and proven and now we are progressively creating this kind of capability and going into the market. With the current capability, we have proven that the customers have accepted products and there is compelling value for customers to buy our products and now it is just a matter of expanding.”

In terms of competitors in the construction and mining industry, Elgi Equipments has only 3 brands but 2 competitors, Atlas Copco and Chicago Pneumatic which is one company and have 2 brands and the other is Doosan and the Ingersoll Rand as they (Doosan) acquired Ingersoll Rand. Whereas on the industrial side, it has lot more competitors and internationally the major competitors are Atlas, Kaeser and Ingersoll Rand etc. “There is also competition depending on the product segment for example, if you look at the low end Piston compressors, in Coimbatore there are about 100 manufacturers. If you consider India as a whole, then probably add another 100 which is very fragmented at the bottom. Comparatively, the screw compressors business is more consolidated as there are few fragmented. This is how the industrial structure is in India. Whereas, the global market is highly skewed and concentrated. Even though there are lot of players, the market share if you look at 15 billion a little over 5 billion is Atlas Copco very large and number one and number 2 is Ingersoll Rand even though they are not in the construction and mining segment. In the industrial side, our estimate is about 1.8 billion and then we have Gardner Denver, Fusheng, Hitachi and we are at number seven. You don't see this kind of skew in any other industry, the gap between number 1 and 2 is typically around 20 to 30 per cent and 2 to 3 will be another 20 to 30 per cent. So, we are a bit of symmetrical in the industrial structure whereas in our business, it is much skewed where the number one is far ahead of all others,” he adds.

Organised/Unorganised sectors and GST impact
Varadaraj believes that the reciprocating compressors business has large number of unorganised players though it is not a big part of the market but it is still there. Some of them may have aspirations to scale up to making screw compressors. Stating his views whether GST has affected organised/unorganised sectors he says, “GST is an indigestion, that doesn't mean you stop eating which means that these businesses are not going to shut down and go away but their ability to sell will have to be different. Earlier ability to sell was flying under the tariff, now that has become more transparent and that opaqueness is gone. Now you got to charge the cost, price structures have changed. You have got to fight in the market on first principles so some will scale up and some will scale down but I don't think one will have to see collapse as its somebody's livelihood.”

The unorganised sector comprises of customers for reciprocating compressors. Customers include small workshops, tire repair shops, and small scale manufacturing. It is difficult to comment on the unorganised sector in general as the different industries will have different outlooks. As these customers grow, they will consider small screw compressors for improved performance and low noise. There are plenty of regional and partially national players for the reciprocating product segment.

Catering to the construction equipment segment
Construction and mining as a category has two parts. One is the drilling that is for water well, coal and the other is the construction and mining segment. In drilling segment, Elgi Equipments has more of a pseudo-direct sales and marketing. In the construction and mining it goes through distributors and it has about 30 distributors. In 15 cities Elgi Equipments have its own branches, sales and services available in 40 locations. “This is our channel to the construction and mining segment and in this segment our play is pure compressors. We don't make any other equipment, informs Varadaraj.

In addition, the company has varied solution in this segment. For example, for construction segment Elgi Equipment's customers are small road contractors up to large infrastructure companies. The blue metal quarrying, sometimes the large quarry owners have their own equipment; the smaller quarries have their contractors coming and doing the work. Also, the stone quarry which is marble or granite, again the large players has their own fleets.

Strengthening manufacturing capabilities
Briefing his views on how Elgi Equipments is working towards streng­thening manufacturing capabil­ities Varadaraj explains, “We have steadily adopted the latest technologies in our manufacturing processes, widened our product portfolio, and enhanced our products with features that enable higher efficiency and reliability. This is visibly evident in the company's state-of-the-art foundry and air end plant at Coimbatore, undertaking the final assembly of the compressors to product support, and overall the brand positioning. All this, despite the origin of the company being fully family based has been built up through adaption of advanced professional business standards.”
To have higher focus on quality, price competitiveness and production monitoring, Elgi Equipments custom designs its own rotor milling machines to produce quality rotors at lower manufacturing costs. Low vibration, higher rigidity and self monitoring aspects of the machines results in tightly milled rotors produced quickly without defects.

Product quality is ensured through audits and tests for performance
and reliability at the atmosphere-controlled test rooms in the factory, which is equipped with a conveyor assembly line with autom­ated monitoring, testing stations, and a production capa­city of 15,000 screw compressors and 25,000 piston compressors per year.

‘Customer Experience Programme' for aftermarket services
“In my views, aftermarkets service means you have already given pain to the customer,” states Varadaraj. To overcome this issue, Elgi Equipments has ‘Customer Experience programme' where in there are layers. The first layer is when a product fails, one responds very quickly and fix it right the first time so it need not be fixed ten times. The second layer is: how can I predict the defect and get there before the actual defect happens which is through Elgi Equiments's air alert. It is a remote monitoring system launched recently. It is a simcard based device which will tell what is happening to the machine and therefore one is able to predict a failure. The last layer is the prevention of the failure. So all of this in line ensures customers experience level is at the highest level.

Air Alert is a free of cost sim based data transmission service that will monitor compressors critical parameters to ensure optimum energy consumption and compressor failure prevention. An air alert equipped customer can rest assured that the changes in their energy consumption will be detected by ELGi's Air Alert service and shall be reported immediately for rectification.

Informing whether Elgi Equipment's aftersales service has impacted customers' satisfaction levels Varadaraj comments, “Aftermarket Service function at Elgi Equipments ensures quality of response and resolution by way of “restoring the compressors within 48 hours” and ensuring that the resolution is always “first time right”. Our customer feedback result indicates that 97 per cent of our customers stay satisfied with our services.”

Skilling is not isolated
“Skilling is not an isolated thing, this is made to link to our desire to make our products with the lowest defect,” says Varadaraj. He adds, “Lowest defect can be achieved by engineering, by process, in each of these one has to be very good but whatever you do to the last mile in the quality is the human being. When that human being is assembling a particular part, there are things that cannot be put in a drawing but you can feel in the assembly itself that something is not right. Unless you have a person who is fully engaged in that making, you are not going to get that commitment. Now, that engagement comes from the knowledge which is what training of our people to ensure what to do. But knowledge doesn't make you highly committed to it.”

Nurturing tomorrow's future
Elgi Equipment's Corporate Social Responsibility (CSR) emphasises more on education, vocational training and enhancing the quality of life for underprivileged children. Highlighting some of the major CSR activities Varadaraj says, “Right now, our entire focus of CSR is on education of youngsters from challenged background through vocational training school. We run a school 20 minutes away on the outskirts for Coimbatore. Our goal is to make that school the best to make 50 per cent of those students' strengths; we aim to have high quality residential accommodation for youngsters. Such children who perform well and on their own merits they get in to college and those who don't score well will get into our vocational training schools and those who pass vocational training will get in to our company. So we are trying to do a kind of end-to-end impactful change for those who have a very challenging life.

Outlook on budget and its impact on the compressor segment
Varadaraj says, "The commitment has been set aside well, less than the expected commitment on the infrastructure where it has been more disproportionate towards the railways it is ok but in terms of infrastructure like roads, metros, the expectation was much higher but we are not that dependent on the infrastructure that the investment in our business. So it is good but they have not clearly defined how they are going to allocate and towards what they are going to allocate. We are still waiting on the roadmap."

“In two years, our markets in Europe and USA will be larger owing to faster growth. Our technology will give us the lowest lifecycle cost. We anticipate being on track for our 2027 goals of being number two in the world, concludes Varadaraj while revealing about Elgi Equipments's envision in the next two years," he adds.

Hits: 11