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India's Elgi acquires US compressor distributor for $6 mn

Chennai

17-December-2019

Continuing its strategy of gaining overseas market by acquiring distributors, India's compressor maker Elgi Equipments Ltd has bought Michigan Air Solutions (MAS) in the US for about $6 million, said a top official.

He also said Elgi Equipments' new plant to make motors will go on stream soon so that motor imports can be stopped.

"The investment in the motor plant will be about Rs 18-19 crore," Jairam Varadaraj, Managing Director told reporters in a conference call on Tuesday.

Speaking about the US acquisition, Varadaraj said: "With about $10 million revenue, MAS is one of the largest distributors in Michigan and we had business relationship with the company. They looked at us as one of the possible suitors. We decided to buy."

According to him, MAS will discontinue its relationship with other compressor makers and start selling only Elgi products.

Varadaraj said the acquisition of MAS is expected to increase Elgi compressors marketshare in the US and the target revenue for financial year 2019 is set as $12 million.

Last year Elgi Equipments had acquired Pulford, an air compressor distributor in Australia.

"Compressor distribution is a legacy business. No new person gets into this business. Acquiring a competitor in the end is a losing business," Varadaraj said.

According to him, acquiring the distribution network provides the company stronger foothold in the market.

Earlier, Elgi Equipments followed the strategy of acquiring a competitor.

According to him, the company had followed the 'Elgi Inside' policy, making the compressor with its components but selling under the acquired company's brand - but that did not click in the overseas markets.

The Coimbatore headquartered compressor major is planning growth in Europe where it is setting up its own office and related network.

Varadaraj said the six strategic overseas markets for Elgi Equipments are India, Europe, US, Australia, Indonesia and Thailand.

He said the consolidated revenue of Elgi Equipments is about Rs 2,000 crore out of which nearly 50 per cent is from overseas.IANS