ELGi mulls a long-term spend of over ₹500 crore to consolidate manufacturing into a single site

ELGi Equipments Ltd, a leading manufacturer of air compressors, is planning a long-term investment of ₹500-crore plus to shift its current manufacturing operations inside Coimbatore to a large campus outside the city, a move that is expected to help the company achieve better efficiency.

In the current scenario, the company has two types of capex — the long-term capex and its regular, annual capex.

“At this point of time, ELGi is likely to incur an investment of more than ₹500 crore under the long-term capex programme. This is meant for establishing new buildings and production lines in its 120-acre campus outside Coimbatore. “We are running out of space in the current site that is located inside the city. “We will progressively shift our city factory operations to the new campus over the next five-six years, which will help us gain efficiency. A portion of our city operations moved to the new campus about a decade ago,” Jairam Varadaraj, Managing Director, ELGi Equipments Ltd, told businessline.

The annual capex that the company will have to invest primarily in plant and machinery would be in the range of ₹50-60 crore every year.

• Also read: ELGi in tech pact with Italian firm to manufacture, sell vacuum products

2x growth

The Coimbatore-headquartered company grew at 2x of the global air compressor market growth during FY13-23. The global air compressor market has grown at a CAGR of 3 per cent from $14.7 billion in FY13 to $19.1 billion in FY23, while ELGi’s operating revenue grew at a CAGR of 6 per cent from $209 million to $371 million (@₹82/$) during this period.

In FY23, ELGi was the sixth largest air compressor company by value globally. The top five global players include Atlas Copco, Ingersoll Rand, Hitachi-Sullair, Kaeser, and Fu Sheng.

ELGi is sticking to the targets revised last year under the Strategic Business Plan Programme. The company is targeting consolidated revenues of about $450 million from compressor business by FY26 and EBITDA margin and ROCE targets of 16 per cent and 30 per cent respectively by the same period.

The company hopes to end this fiscal with a total revenue of $356 million, up from $334 million in FY23. Currently, the compressor business makes up 92 per cent of its revenue, while the rest comes from the automotive business. In compressor business revenue, India accounts for 48 per cent, while global markets bring 52 per cent.

Meanwhile, Varadaraj flagged concerns over the sizeable inflow of Chinese products and the consequent pressures on prices. “The Chinese economy being so weak, the aggression with which the Chinese compressor companies are wanting to sell their compressors and pricing of such products in India have caused some challenges. Of course, it is a competitive threat, we need to respond and we are figuring out ways to do that,” he said.

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