Elgi Equipments to restructure Chinese operations

Company acquires Ergo Design Private Limited, an independent industrial design studio

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Elgi Equipments Limited is planning to restructure its China operations and to acquire Coimbatore-based Ergo Design Private Limited, an independent industrial design studio.

The company has got nod from the Board for both the decisions.

In an announcement to the Exchange today, the company said due to the economic slowdown in China, the company's business operations have been severely affected there is a need for restructuring to be carried out in order to minimise losses and approach the market in a focussed manner by supplying products that meet local market requirements.

The plan is to expand the business licence of Elgi Equipments Zhejiang Ltd to include trading activities. It was also decided to restructure by adopting measures like optimisation of manpower, surrender of manufacturing licence, moving to a smaller location and carry on purely import, warehousing, selling and servicing of compressor products. The manufacturing license be freshly applied for as and when the new products are made available and business improves in the future.

Elgi Compressors Shanghai Trading Ltd promoted to engage in trading activities since Elgi Equipments Zhejiang Ltd possessed only a manufacturing license at the relevant time and was not permitted to engage in trading activities.

Ergo Design Private Limited Zhejiang Ltd has now obtained a license to trade and therefore, the company decided to wind down Elgi compressors Shangha Trading and carry on all trading operations inElgi Equipments Zhejiang Ltd.

Elgi also decided to acquire equity of Ergo Design Pvt Ltd, which is based in Coimbatore. The independent industrial design studio of the company is at Bangalore and the company has 15 professionals including design strategist, product designers, graphic designers, architects, mechanical engineers and prototyping specialists.

Ergo Design's turnover was Rs 61,79,457 in 2014-15 and was reporting marginal profit.

In order that the company has better control over the intellectual property rights created by Ergo Design with inputs from the company and to save costs, the Board decided to acquire the entire share capital of Ergo Design, said the company.

The company said it will make Ergo Design as a wholly owned subsidiary once the purchase is completed.