Elgi to invest Rs 850 cr overseas

Coimbatore-based Elgi Equipments Ltd (EEL), an engineering company that makes industrial air compressors, is planning to invest around Rs 850 crore for setting up warehouse and manufacturing facilities outside India.

The first such facilities are coming up in China and Brazil, where the company is investing around Rs 50 crore.

The China facility, located at Jiaxing, 100 km from Shanghai, will commence trial operations by July this year, while commercial operations will start by September 2008.

Later this year, the company will commence warehousing operations in Brazil before the launch of a full-fledged manufacturing facility that is expected to start operations by the end of 2009. The company has proposed to invest around Rs 15 crore in Brazil.

Speaking to Business Standard T Govindarajan, head (marketing), EEL, and N Raghavan, head (domestic sales and service), EEL, said the company had been a dominant player in the Rs 1,500 crore Indian compressor market and the time was ripe for it to address the Rs 35,000 crore global market.

The China plant would initially manufacture air compressors worth about Rs 20 crore, which would gradually be increased to Rs 30-40 crore in the third year, said Raghavan.

For the first three years, Elgi China will cater to the domestic market in that country and later export to countries like Vietnam, Malaysia, Singapore and Thailand. Over the next five years, the company expects China to account for 10 per cent of its global revenues.

The Brazil facilities too would cater to both the domestic market and neighbouring countries such as Chile, Colombia and Argentina.

Govindarajan said the new offshore manufacturing and warehouse facilities would help the company cut costs, lower freight charges and reduce delivery times substantially. By 2015, the company hopes to take its turnover to Rs 4,000 crore, of which Rs 3,000 crore, or 75 per cent, will come from outside India.

On the domestic front, the company is planning to invest Rs 150 crore over the next five years.

Meanwhile, Elgi has also opened its subsidiary at the Sharjah Airport International Free Zone (SAIF) in the UAE. The office-cum-warehouse facility would enable the company to expand its product offering and ensure immediate service in the fast growing West Asian market, he said. The company has invested around Rs 10 crore in this facility.

EEL stock price on Thursday closed at Rs 52.25 on the Bombay Stock Exchange up by less than half a per cent.