With his eyes on the Indian air compressor market, managing
director of India’s leading air compressor manufacturer, ELGi Equipments, talks
about making his company world number two. In a conversation with Sushila
Ravindranath, he discusses the company’s expansion plan and adapting the
business to digital era and Internet of Things.
Jairam Varadaraj, managing director, Coimbatore-based ELGi
Equipments, India’s leading air compressor manufacturer, wants to make his
company world number two in the global market by 2027. He hopes to achieve a
revenue of $1-billion in the next five years to do that. The current turnover
is $238 million. The company has undergone a new brand identity with a new logo
and colour scheme for its entire product range, which was unveiled a few weeks
ago. The new colours are red and black, replacing the old orange and grey. “Red
stands for performance, passion and energy. Black is bold and helps establish a
clear brand world,”
Varadaraj says.
ELGi Equipments was established in 1960 as an air compressor
and garage equipment manufacturing company. Over the years, the company has
grown its product portfolio to suit changing market requirements.
Today, ELGi Equipments is a multi-product, multi-market
enterprise that provides total compressed air solutions in all segments and
automotive service equipment for garages. It has three manufacturing units, all
three located abroad, business presence across more than 70 countries, and
direct presence in 18 countries. It makes more than 400 compressed air systems
and employs 1,200 people.
Varadaraj is visiting Chennai and has had a series of
meetings, promoting the new logo among other things, in Crown Plaza. We meet
for coffee and sandwiches at the Cappuccino, the hotel’s coffee shop late
afternoon. We ask for strong south Indian coffee to start with. I ask him where
his company stands in the global rankings now. “We are number 7,” he says. “50%
of our sales come from outside the country. Local business after the slowdown
is showing signs of recovery. Large projects seem dead, but incremental
investments are taking place. There was the shock of demonetisation. Everybody
paused. Now there is GST. We have moved from one complicated tax regime to
another. We don’t know how it will be tamed. There are disconnects. Are we
ready in a real sense? There are gaps in so many good schemes. We are an
incomplete nation. In spite, we can muddle along being a strong Indian
company.”
Our coffee arrives. We ask for assorted sandwiches.
Varadaraj explains what global leadership means to him. “To become a global
leader is a different ball game. You have to acquire enterprise leadership as
the Japanese did in the 1970’s and the South Koreans in the 1980’s and 1990’s.
It takes time to become an enterprise leader. You have to have enormous
perseverance. You need your leaders to be sitting in the countries you are
establishing your business.”
In every country Toyota operates, the top man is Japanese.
So it is with South Korean Hyundai. Perseverance requires big investment. When
I was working on my PhD at the University of Michigan, many of the South Korean
MBA students, who were there that time, came to India later to set up new
companies.”
As our sandwiches arrive Varadaraj tells me that India has
not really built a global company yet. “Global scale is different from being
global. We have to decide whether we are strategic investors or portfolio
investors. We really don’t have that kind of thinking in India. The company
that has become closest to becoming global is M&M. I feel happy when I see
their tractors on the fields when I travel in the US.”
Why is Varadaraj confident of ELGi Equipments becoming
number two in the world? He tells me that the company has been working towards
it. “We are not a known brand. ‘Made in India’ does not exactly take you
places. We can’t capture markets by price alone. There has to be a value
proposition that is superior. We need to provide quality which is better than
others. The warranty on our machines is the best. We back up our warranty with
good quality proposals. Then comes service. The service you provide signals permanency.
You can’t sell a machine and disappear. You also have to look at being
technologically the best. That gives you the right to win.”
Air compressors have to go through discontinuous
innovations. These cause a paradigm shift in the technology and the market
structure of an industry. It is a new technology applied to solve an existing
need in a new way. “We are developing oil free compressors for different
applications. In the customer’s mind this looks like an expensive product.
We connect the dots; develop an oil free compressor for
which you do not have to pay more. Air compressors account for 10% of energy
consumed in the world. We are working on reducing that”.
ELGi Equipments is investing in breakthrough technologies.
“Some of the products are two years away, but solid. Information Technology is
morphing at a very fast pace.
We are working at adapting ourselves at the same speed to
digital technology, Internet of Things. We won’t be left behind. There is ample
opportunity to partner with specialist companies.
Varadaraj’s major worry is about the availability of skills.
“We can create the processes, but how can we create people. This is a source of
concern. Research and education institutions are regressing in our country. We
don’t invest in teachers. We are relying on the native intelligence of our
youngsters to excel. I send people out
to get training. We conduct a lot of internal programmes. We are putting a lot
of building blocks together”.
We are being served some tempting tiny pastries. I pick up a
black chocolate cake and ask him why he needs to re-launch his brand. Air
compressor is a utility in a factory like electricity. Literally, every factory
need needs compressed air, and therefore a compressor.
Do they require brand building? Varadaraj answers. “We are a
business to business brand. Conventional brand building methods are not
relevant to us. Brand is built by the customer’s experience. Visual
representation of the brand provides familiarisation. We have just launched a
visual experience.”
The company has just created a branding project with an
emotional dimension which also reflects the company’s competence.” We are
experts in air. Can we make the national flag fly all the time in Delhi’s
Connaught Place?
Even the White House flag does not fly all the time. Can you
imagine the Indian flag flying doing that at the Wagah border? We have made the
flag fly in our factory with low energy sustainable compressor. We are
converting that technology to fit into any flag pole.
As Varadaraj is finishing his coffee, I ask him why he will
not think of diversifying. “Indian air compressor market is worth $600 million
and the global $15 billion. Both are growing fast. Why would we focus on
anything else?”
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