| Elgi Equipments Limited | ||||||
| Ratings reaffirmed at 'Crisil AA/Stable/Crisil A1+' | ||||||
| Rating Action | ||||||
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| Note: None of the Directors on Crisil Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale Crisil Ratings has reaffirmed its 'Crisil AA/Stable/Crisil A1+' ratings on the bank facilities of Elgi Equipments Limited (Elgi).
The ratings continue to reflect the strong business risk profile of Elgi supported by its established market position, large distribution network in the domestic and overseas markets, and healthy operating efficiency. The market position is supported by the strong recall for the Elgi brand and vast product profile catering to various end-user industries. The ratings also factor in the healthy financial risk profile and strong liquidity position of the company. These strengths are partially offset by susceptibility to volatility in raw material prices and intense competition in the domestic and export markets, the moderately working capital-intensive operations, modest albeit improving performance in European subsidiaries, and cyclicality in demand from certain end-user industries. However, planned price hikes and rupee depreciation will help offset the movement in raw material prices.
Elgi continues to be the second largest player in the domestic compressor industry and the sixth largest globally. The company demonstrated a steady performance in the first nine months of fiscal 2026, with a 12% growth in standalone revenue and 12.7% expansion in consolidated revenue. This was driven by a strong showing in the domestic market and a recovery in overseas markets, particularly in the USA, West Asia, and Europe. The domestic market contributes to 47% of revenue, while the rest comes from overseas markets reflecting the company's geographical revenue diversification, which also helps mitigate the impact of fluctuations in demand from end-user industries. Crisil Ratings expects Elgi’s revenue to continue its healthy growth over the medium term supported by improving demand from key overseas markets and sustained momentum in the domestic market, across diverse sectors including automobiles, pharmaceuticals, power, mining, construction, fast-moving consumer goods (FMCG) and healthcare.
Operating profitability remained healthy at 14.3% in the first nine months of fiscal 2026, slightly lower than 14.9% in the corresponding period of the previous fiscal due to increase in employee costs driven by hiring expenses and wage hikes, as well as higher fixed costs related to strategic initiatives and partly due to the impact of increased US tariffs. However, the company has implemented price hikes in the US to counterbalance these effects. Crisil Ratings expects operating margins to stabilise at ~14-15% over the medium term.
Financial risk profile remains strong, supported by comfortable debt metrics and a sizeable networth (estimated over Rs 1850 crore as on March 31, 2026). Elgi is debt-free on a standalone basis, while on a consolidated basis, the company is estimated to have a total debt of ~Rs 400-450 crore as on March 31, 2026, mostly short term in nature. The company is estimated to have undertaken capital expenditure (capex) of Rs 180-200 crore in fiscal 2026 and plans to incur a capex of Rs 100 – 150 crore per annum over the medium term towards planned expansion, including enhancing its capacity in the DPSAC (Diesel Powered Screw Air Compressor) and GSC (Global Support Center) divisions over two years. Steady annual cash accrual of Rs 300-400 crore should suffice to fund its capex requirements. Also, prudent working capital management along with healthy accruals will gradually lower reliance on external debt, further strengthening the debt metrics of the company, with the interest coverage ratio expected to remain above 17 times and gearing below 0.25 time over the medium term. Besides, the company also maintained sizeable surplus of over Rs 1000 crore as on December 31, 2025. |
Analytical Approach Crisil Ratings has combined the business and financial risk profiles of Elgi and its subsidiaries and joint ventures, given the operational and financial linkages.
Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers - Strengths Established market position and strong brand: With an estimated market share of around 25%, Elgi is the second largest manufacturer of compressors in India. Its product profile includes portable, reciprocating and screw compressors, sold under the Elgi brand, through an entrenched channel, comprising dealers, direct sales and spare parts/after-sales segments. The group has dealerships across India and overseas markets and enjoys a dominant market presence in the Indian railway compressor segment. Its geographical reach is strengthened through subsidiaries in Europe, USA, Brazil, UAE, Australia and Indonesia. The company is also the sixth largest compressor manufacturer globally, improving its position from eight in fiscal 2021.
Subsidiaries should improve or sustain their performance as the company strives to consolidate its position in each of the respective markets, albeit witnessing demand moderation in a few markets, as end-user segments cope with cyclicality. The company has also acquired distribution companies in key markets in the past decade, strengthening its position across various markets through the inorganic route.
Revenue is estimated in excess of Rs 3700 crore in fiscal 2026, compared with Rs 3513 crore in fiscal 2025, and expected to register growth of 7-9% over the medium term.
Efficiently run operations: The company has well-run manufacturing and assembly lines, with focus on core competence. Over the last decade, the company has been consistently incurring capex to integrate backwards and manufacture critical parts such as pressure vessels, castings, motors and key production machines indigenously. This has improved its control over quality, efficiency, inventory and overall cost. Operations also benefit from in-house research and development (R&D) capabilities. Operating profitability, supported by improved performance of some subsidiaries, has stabilised at 14-15% in the last four fiscals (2023-2026), while return on capital employed (RoCE) has averaged over 23% during the same period. These metrics are expected to be sustained going forward.
Healthy financial risk profile: The financial risk profile is supported by healthy estimated networth of around ~Rs 1870 crore (March 31, 2026) and modest debt. Healthy cash-generating ability with estimated accruals of Rs 350-400 crore and modest debt (mainly at subsidiaries) is expected to translate into moderate debt protection metrics. Gearing is estimated under 0.30 time as on March 31, 2026; interest cover and ratio of debt to earnings before interest, depreciation, tax and amortisation (EBITDA) are estimated over 17 times and under 1 time, respectively, for fiscal 2026. The company plans to incur annual capex of nearly Rs 100–150 crore in fiscals 2027 and 2028, towards setting up a capability centre, and other projects. This, along with incremental working capital expenses, can be comfortably met from expected cash accruals. Debt protection metrics will continue to be robust, in the absence of significant debt addition. That said, any sizeable acquisitions, necessitating raising of large debt, will be monitorable.
Strong liquidity: The company held cash surplus of over Rs 1000 crore as on December 31, 2025, largely generated from Indian operations. Average utilisation of bank limit was modest at ~6% of fund-based limits (majorly purchase invoice financing limits) of Rs 400 crore for the 12 months through March 2026, which further enhances financial flexibility. While part of the cash surplus could be used for capex, the company is still likely to maintain strong liquid surplus, considering its healthy cash generating ability. |
Key Rating Drivers - Weaknesses Susceptibility to intense competition and fluctuations in demand: The group caters to capital-intensive industries such as infrastructure, automotive and heavy engineering, and hence, its performance depends on the overall economic growth in the domestic market. Product sales are dependent on capacity expansion/upgradation in end-user industries and greenfield projects. A potential slowdown in industrial activity can lead to stagnation in revenue, as witnessed in fiscals 2012 and 2015 and in 2020 and 2021, due to Covid related disruptions.
While capital cost for setting up a compressor manufacturing unit is not high due to the assembly nature of operations, technology plays a major role and acts as an entry barrier. Most large domestic players are subsidiaries of established international companies or have technical collaborations with global players. However, the Elgi group, with its indigenous technology, has been able to retain a comfortable market share in the rotary screw compressor and portable compressor segments.
Moderate albeit improving operations of subsidiaries: During the first nine months of fiscal 2026, the US subsidiary reported improved revenue and operating profitability. However, the European market posed challenges because of weak demand for compressors and the impact of increased US tariffs. Additionally, the Australian subsidiary experienced a decline in profitability, largely attributed to intense competition. In contrast, the operating margin of Gulf entities showed significant improvement, reaching approximately 15% during the same period. Nevertheless, the company remains cautious about the business performance of its key subsidiaries in these territories, given the prevailing high inflationary conditions and sluggish demand in overseas markets, which will require ongoing monitoring.
Moderately working capital-intensive operations: With high revenue generation from international markets (around 46% in fiscal 2026) and diverse product offerings, the company maintains a large inventory of around 90 days. Inventory is likely to remain at these levels, given the growing scale of operations and expansion into newer markets. Gross current assets (GCAs) averaged 197 days in the five fiscals through 2025 and are expected to remain high over the medium term. |
Liquidity Strong Crisil Ratings expects annual cash accrual of Rs 300-400 crore should suffice to cover the minimal term debt obligation of Rs 10-12 crore, incremental working capital requirement over the next two fiscals. and company’s capex plans in the next fiscal. The company has a significant cash surplus of over Rs 1,000 crore as of December 31, 2025, which adds to its liquidity. Additionally, its working capital limits of Rs 400 crore have been minimally utilized, averaging only 6% over the 12 months ended March 2026, mainly for purchase invoice financing. While some of the cash surplus may be allocated towards capex, Crisil Ratings believes the company will continue to maintain a strong liquidity position over the medium term, given its robust cash-generating ability. |
Environment, social and governance (ESG) profile Crisil Ratings believes that Elgi’s ESG profile supports its already strong credit risk profile.
Key highlights:
There is growing importance of ESG among investors and lenders. Elgi’s commitment to ESG principles will play a key role in enhancing stakeholder confidence, given its high share of shareholding by foreign investors/companies. |
Outlook Stable The credit risk profile of Elgi will continue to benefit from its established presence in the air compressor segment, improving revenue and customer diversity, and adequate operating profitability. Strong cash generation and prudent working capital management, along with moderate capital spends, will help healthy debt metrics sustain over the medium term. |
Rating sensitivity factors Upward factors
Downward factors:
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About the Company Elgi, which was set up at Coimbatore, Tamil Nadu in 1960, is one of India's prominent air compressor manufacturers. On a consolidated basis, the company derives around 50% of its revenue from the domestic market and the rest from overseas markets. The company manufactures a range of reciprocating compressors, screw compressors and centrifugal compressors, and garage equipment for the automotive segment through its subsidiary, ATS Elgi Ltd.
The group has trading and marketing arms in the US, Europe, Gulf, Brazil, Indonesia, Malaysia, Thailand and Australia. On August 30, 2012, it acquired the entire stake in Caraglio-based Rotair, which designs, manufactures and distributes a variety of compressors and allied products to the construction and industrial sectors. On November 28, 2012, the group acquired the entire stake in Charlotte (US)-based Pattons, which distributes and assembles industrial compressors and air products. It also has a captive foundry that commenced operations in 2013. In August 2018, the group acquired 100% stake in Sydney-headquartered F R Pulford and Son Pty Ltd, which is engaged in the distribution of industrial compressors. The acquisition of Michigan Air in December 2019 further strengthened its market position in North America.
On a consolidated basis, Elgi reported a net profit of Rs 302 crore on an operating income of Rs 2,838 crore in the first nine months of fiscal 2026, compared with Rs 248 crore and Rs 2,518 crore, respectively, in the corresponding period of fiscal 2025. |
Key Financial Indicators
*Crisil Ratings-adjusted numbers |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
& - Interchangeable with overdraft facility |
Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Annexure: List of instruments and names of regulators of the instruments As required by SEBI CRA Circular dated Feb 10, 2026, a list of activities or instruments falling under the purview of various FSRs, along with the names of respective FSRs, is being disclosed below:
* Includes securitisation transactions involving assignee payout, acquirer's payout. ~ The rated instrument may involve issuance of different instruments such as debt securities (listed or otherwise), bank loans, commercial paper (listed or otherwise), etc. The regulator of the instrument may accordingly be SEBI, RBI or MCA and can only be determined upon issuance. In PRs subsequent to issuance(s), Crisil Ratings Limited shall separately capture the rated quantum details along with names of respective regulators. ^ Includes bank facilities such as liquidity facility, second loss facility that are part of securitisation transactions. # There is no instrument being rated and hence, Regulator of the Instrument is not applicable. The rating scale and definitions are being followed as stipulated in SEBI Master Circular for CRAs. @ These ratings were assigned during regulatory regime prior to introduction of SEBI CRA Circular dated Feb 10, 2026 and the investor side regulators have accordingly been included.
Note: Kindly note that for activities or instruments falling under the purview of FSRs other than SEBI, the grievance/dispute redressal mechanisms and investor protection mechanisms provided by SEBI shall not be available. |
Criteria Details
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