Engineering Air, Empowering the World: ELGi’s Ascent to Global Leadership

In 2019, during Hannover Messe, you stated ELGi’s aspiration to become the second-largest compressor manufacturer globally. How do you assess progress towards that goal today? Is it still a realistic ambition, and what drives your consistent confidence in this vision?

At that time,  the number two and number three global air compressor manufacturers were independent companies. Now, they’ve come together and formed a significantly larger number two. So, our original goal of becoming number two by 2035–36 was based on that earlier landscape. But now, leapfrogging a combined number two is unrealistic.

Our revised goal is to be among the top three—not necessarily number two, but definitely in the top three by 2035–36.

The reason we’re still calling it CK2, and not CK3 (since there is no CK3), is because internally, everyone knows what CK2 stands for. You talk to anyone in the company—they know what CK2 means. It’s a very powerful message and carries strong emotional resonance.

ELGi has always placed a strong emphasis on backward integration to ensure control over cost and quality. Could you share any recent developments or advancements on this front?

The backward integration isn’t aimed at driving incremental short-term profit opportunities. Let me explain three—or actually, four—areas where we’ve implemented backward integration.

The first one is building our own machines. Why did we do that? Not to get some minor savings. If you look at a compressor, about 30% of its cost comes from the air end, where the two rotors and the casting are. That’s the heart of the machine. Now, all our competitors—including us—make the airend in-house. Most of our competitors source the rest of the components from outside.

To truly compete and become the best in the world—not just by selling low-priced machines—we had to use technology as a key enabler. Out of that 30% airend cost, about 90% comes from the rotors. And within that, 90% is the cost of machining. So effectively, about 20% of the total compressor cost comes from that one machine.

How do we reduce that? There are only two or three manufacturers globally that everyone buys from. When we studied those machines, we realized there was a way to design and build them locally using our talent. So, we did just that—and we built the machine at one-fifth the cost. That brought the cost down from 20% to just 4%. These are highly strategic decisions—not made for short-term savings, but to reduce cost while also maintaining quality.

If we had bought cheaper machines—say, from China—it would have compromised our performance. So, we had to maintain quality. That’s one example.

We also make our own pressure vessels—the tanks. Why? Because a European brand can fail and still be forgiven. But if an Indian brand fails—especially when it comes to safety—it’s never forgiven. A pressure vessel is a safety-critical item. So, we couldn’t take the risk of outsourcing it.

Even though it’s not a high-value product—it’s essentially metal forming and not high-tech—we use advanced manufacturing methods like robotics to make it. That’s another example.

Then there’s the foundry. A foundry is essentially a white elephant—it doesn’t make us any money. But we still invested in it, knowing that, because casting quality is critical. We cannot afford leaks. That’s the rationale.

Then there’s the motor. We had been buying motors from China for 20 years. Their landed cost—after freight and duties—was still 30 to 50% cheaper than Indian-made motors, and the quality was better. We were surprised. So we dismantled the motors. A motor is essentially metal—copper, steel, casting—no complicated electronics.

When we analyzed the parts and their weight, we realized there was no way they could supply it at that price unless there was some government subsidy involved. That’s a risk. We didn’t know when or if that subsidy would be withdrawn. Plus, the lead time was three months, which meant high inventory.

So, we asked ourselves: can we put together a team and use technology—not just cheap labor—to make a motor that performs better and costs the same as the Chinese product, at worst? The team did an outstanding job. It took three years, but we built a motor that performs much better and costs less. We tested it, proved it in the market, and once confident, we invested. Today, we’ve expanded that motor range—this year, 80 to 90% of our motors are made in-house.

Again, the main reason was risk reduction—not primarily cost. Cost reduction became a side benefit.

As for what’s pending now in terms of backward integration? There’s nothing critical at the moment. But beyond compressors, there are adjacent areas—like dryers. We’ve developed and globally launched our own refrigeration dryers. We’ll also look at desiccant dryers. Those are more horizontal expansions.

From being a strong Indian brand to becoming a respected global player, ELGi has achieved significant international recognition. What, in your view, has been the core mantra for this global success story?

The core technology in compressors hasn’t fundamentally changed in a long time. Most innovations today are in the add-ons—electronics, software, communication systems, IoT features—which we also have in our products.

But what we’re doing in our innovation organization is fundamentally questioning the basics of compressor technology itself. For example, the product we recently launched—the Stabilizer—addresses the technology at a fundamental level. It’s not just another add-on. And we have quite a few such innovations in the pipeline. I can’t talk about them yet, but at the appropriate time, we will share more.

So, we see two aspects of our product roadmap: one is product development, which involves embedding the latest available technologies; the other is true innovation, which means building what’s next. This is a major focus for us.

Sustainability and ESG goals are becoming central to how modern manufacturing companies define success. Could you share how your organization is integrating these principles—particularly in areas like energy use, water management, supply chain practices, and community engagement—and how they align with your long-term business strategy?

People often talk about sustainability and ESG goals. You’ve been to our plant and seen several of our initiatives to reduce waste and support climate-conscious manufacturing.

First of all, our power consumption relative to our revenue is already very low. I believe it’s around 2%. But even with that low footprint, we see an opportunity to go fully green.

Currently, around 48–50% of our manufacturing electricity comes from renewable sources—both wind and solar. Our goal is to reach 100% renewable energy in the next four to five years. And given our relatively low energy needs, this is quite achievable.

Our second major initiative is water. We’ve committed to not drawing groundwater and not depending on external water supply. Instead, we aim to be fully self-sufficient through rainwater harvesting and water recycling.

Outside the plant, we’re also making sustainability a priority. Many of our local supply chain partners have already switched to electric or gas-powered vehicles for deliveries. Eventually, we aim for 100% low-emission logistics.

Even in our compressor design, our primary objective is to reduce energy consumption. The Stabilizer is one example of how we’re helping customers lower their energy costs. We’re also working on multiple initiatives to make our compressors more environmentally friendly overall.

Safety and inclusivity are both critical pillars of a progressive manufacturing environment. From what I’ve observed in your facilities, there’s a strong emphasis on both. Can you share the key steps your organization has taken to ensure workplace safety for all employees, and specifically, how you are enabling women to thrive on the shop floor and in technical roles within what has traditionally been a male-dominated industry?

Now, merging two important topics—plant safety and women empowerment.

Safety is a top priority for us. Of course, we have company-wide policies and safety protocols. But what really matters is creating a culture where every individual takes ownership of safety.

Each employee is responsible for their own safety and must speak up when they see unsafe conditions. To support this, we’ve developed an app where employees can report near misses or safety concerns. There’s also an anonymous whistleblower platform for reporting persistent issues that haven’t been resolved. The idea is to encourage feedback and drive continuous improvement in our safety culture.

When it comes to women empowerment, we’re deeply committed to gender diversity. That said, it’s a challenge in a mechanical engineering environment to attract women, particularly for shop floor roles.

About 7–8 years ago, we started a vocational training school on our premises. In the first batch, not a single girl applied. It was only by the third batch that applications started coming in, and even then, only when parents moved to Coimbatore with their daughters, due to safety concerns and perceptions about factory environments.

Today, around 35–40% of our training school batch are girls. These young women are now starting to take over roles from retiring male employees. We expect that in another 3–4 years, women will make up about 30–35% of our shop floor workforce.

What, in your view, has been the key to evolving from a solid Indian brand into a globally respected name?

For us, brand strength is built over time. We’re not the kind of company that can sponsor an IPL team and expect instant brand recognition. Ours is an experience-driven brand. The real question is: What is the experience when someone interacts with us?

Whether it’s a customer, an employee, or a supplier—if the experience is fair, positive, responsive, and respectful, that’s what builds brand trust. And in our space—capital goods and mechanical systems—it takes time. We’re not selling consumer products. It’s a long-term journey.

FY25 has been marked by significant innovation milestones for ELGi – from STABILISOR to the EG PM and EG SP series. How do you see these innovations transforming customer experience and reinforcing ELGi’s market position?

FY25 has been a landmark year for innovation at ELGi. Products like STABILISOR, EG PM, and EG SP Series represent the next generation of smart, energy-efficient compressors. These innovations are reshaping customer experience—reducing operating costs, enhancing uptime, and simplifying maintenance. More importantly, they position ELGi as a technology-forward partner capable of anticipating and responding to evolving industrial needs.

With solutions like Air~Alert and the Neuron 4 Controller, ELGi is embracing IoT and intelligent automation. How are these technologies redefining compressor management and operational uptime for customers?

Solutions like Air~Alert and Neuron 4 Controller are redefining the way customers manage compressed air systems. Through predictive analytics, real-time alerts, and remote monitoring, we’re enabling higher uptime, better energy management, and reduced total cost of ownership. These are not just features—they’re value-driven technologies that elevate customer operations to Industry 4.0 standards.

Given your extensive international footprint, how do you balance customization for local markets with maintaining a standardized global product philosophy?

Our product platforms are globally standardized for quality, but our engagement is hyper-local. We’ve set up regional application engineering teams that tailor our solutions to local requirements—be it climate-specific configurations or regulatory compliance. This dual approach ensures we maintain global integrity while resonating with local market needs.

ELGi has launched specialized products like the PG 850S-290 for harsh drilling and mining conditions. How important is segment-specific product innovation to your growth strategy?

Segment-specific innovation is vital to our growth strategy. The PG 850S-290 is a perfect example of how we respond to unique industry challenges—like harsh drilling environments. Similarly, we’ve developed custom solutions for sectors like pharmaceuticals, food processing, and textiles. This depth allows us to offer purpose-built, high-performance solutions that stand apart from generic offerings.

Looking ahead, what are your key priorities for FY26 and beyond in terms of product development, market expansion, and customer engagement?

Our focus moving forward includes expanding our market reach in Africa and Latin America, accelerating digital transformation, and driving innovation in oil-free and energy-efficient technologies. Product development will prioritize sustainability and smart features. We also plan to enhance customer engagement through better service delivery, training programs, and digital touchpoints. Ultimately, our aim is to be recognized not just as a compressor manufacturer, but as a trusted partner in our customers’ growth journeys.

A lot of young people today are excited about startups. But it’s no secret that building a manufacturing startup is incredibly challenging—especially compared to software or services. Given your experience in building strong brands and taking them global, what would be your advice to young entrepreneurs coming out of IITs or IIMs who are passionate about manufacturing? What key steps should they focus on to build a strong, globally respected Indian brand?

One thing I would strongly advise is—don’t just copy another product. If you’re copying, your only differentiation is price. And if you have to sell it cheap, then you have to build it cheap. That goes against the very reason most of us work—to create value, to grow, to earn more.

To truly create something valuable, you need to innovate. And where does innovation come from? It doesn’t always come from what the customer tells you directly. Real innovation often starts with identifying the customer’s unstated needs—things the customer may not even be able to articulate.

If you can spot that gap and design a solution around it, that’s where the real transformation happens. That’s how strong, meaningful, and globally relevant Indian brands will be built.

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