Elgi eyes M&As for market share

Elgi Equipments Ltd. has drawn up aggressive plans to become the number two in the global air compressor market in 10 years, mostly through inorganic growth, said a top official.

“We aspire to become the number two firm in the global air compressor market by 2027 by acquiring overseas distributors and setting up assembly lines in the U.S., to increase our market share,” said Jay Varadaraj, managing director, Elgi Equipments.

Elgi has identified about 25 distributors in the U.S. and Europe. It is yet to initiate talks with them, he said. The company has set aside ₹5,000 crore for the purpose.

According to Mr. Varadaraj, the air compressor market globally was estimated at around $15 billion and in India it was around $600 million. Last year, Elgi Equipment clocked turnover of $230 million of which 90% came from compressor business. The revenue split between domestic and exports was 50:50, he said.

“In the last eight years, we have posted compound annual growth rate of 14.3% against the industry growth rate of 2.5-3%. If we have to achieve the aspirational level, we have to clock CAGR of 28%. It is not going to come through organic growth. We have to achieve this through inorganic growth too. We have the product, process, people and technology to achieve this,” he said.

At the end of the 10th year, Elgi Equipment wish is to move from the present seventh slot to second slot. Mr. Varadaraj believes 70% of growth would come from acquired business and 30% through organic growth.

As short term measure (five years), the company is hopeful of increasing its revenue to $1 billion. For, which it might invest around ₹1,000-1200 crore over the next three years to beef up its infrastructure.

“Today, we are a debt free company. We have a equity capital of ₹500 crore and we might not raise any capital. Our debt equity ratio also will not exceed 1:1,” he said.

Asked about the possibility of setting up a unit in the U.S., he said it would be considered once the sales volumes there touches 1,000 units per annum.

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Printable version | Sep 16, 2021 1:02:08 PM |

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