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Thursday, Mar 09, 2006


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Corporate - Interview

Elgi's risk mitigation strategy pays off

R.Y. Narayanan

Coimbatore , March 8

Elgi Equipments Ltd (EEL), which witnessed a flat growth during last year due to fall in demand for rig compressors, has put in place a risk mitigation strategy by shifting focus on industrial compressor segment that is non seasonal and on exports to diverse economic entities, Dr Jay Varadaraj, Managing Director, said.

In an interview to Business Line, he said when in the past the sale of rig compressors that brought a chunk of the company's revenue dipped, the overall performance took a hit. But, during last year, when the rig compressor segment took a knock, the net sales only remained flat. This was due to the increase in the sale of industrial compressors and due to exports. He conceded that this had been achieved at the topline level but not at bottomline. The margin was high for rig compressor because of the near monopoly the company enjoyed in this segment, limited number of customers and as it was a non-credit business. But the down side was the fluctuation in demand.

He said India would never be able to compete with China as a `manufacturing entity' in certain areas. India was not a match to China in areas involving very high volume and very repetitive kind of production. But if the volume was small to medium, he did not expect China to be a competitor to India.

Dr Varadaraj said his company had secured its first order this year for a locomotive OE in the US. Though it was not a significant order, he expected it to grow into a major order in the coming year. Once it matured, he expected the order to be a `$3-million opportunity'. He hoped that during 2006-07, there would be a closure on this deal. Since the product involved safety issues, it required tremendous amount of validation, testing and integration. Elgi's product has met all performance parameters set by the US client.

Asked whether Elgi has been able to capitalise on the boom witnessed by the manufacturing sector in India, he said during the current year, 20-25 per cent growth was definitely possible for his company.

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