Jairam Varadaraj, Managing Director of ELGi Equipments.  | Photo Credit: Bijoy Ghosh

Micro, small and medium enterprises (MSMEs) should not aspire to remain small forever. Once they achieve stable profitability, they must shift their focus from merely making money to building larger, purpose-driven enterprises, said Jairam Varadaraj, Managing Director of Elgi Equipments.

Further, MSMEs must grow from producers of “me too” products to those who make ”I first “ products, he said, speaking at the MSME Growth Conclave, organised by businessline at Coimbatore.

Varadaraj argued that remaining an MSME should be viewed as a starting point rather than a destination.

“There is a lot of seduction to remain small,” he said, referring to the tendency of businesses to avoid regulatory scrutiny or preserve complete ownership. “Small is a good starting point. It is not a good state. MSMEs have to stop becoming MSMEs at some point. They’ve got to grow.”

He said entrepreneurs often fear losing control as their companies expand, or hesitate to dilute ownership. But these concerns, he said, should not stand in the way of creating larger, more valuable businesses. “I would rather own 5 per cent of a company worth billions of dollars than 100 per cent of a company worth a few million dollars,” he remarked.

Varadaraj also challenged the conventional belief that government support is indispensable for business growth. While policy support is welcome, companies should develop the capability to succeed despite policy hurdles rather than depend on government incentives.

Another mindset that needs changing, he said, is India’s reliance on low-cost manufacturing and “me too” products. Instead, businesses should strive to create “I-first” products — innovations that are first of their kind.

He illustrated the point with examples such as Apple’s touchscreen smartphone, which addressed an unstated customer need that users themselves had not articulated, and the introduction of shampoo sachets in India, which solved consumers’ cash-flow constraints rather than reducing the price of shampoo.

“The tyranny of cheap labour should only be a window, not a permanent strategy,” he said. “We cannot build a country on the back of Indians being cheap.”

According to Varadaraj, sustained growth also requires companies to move beyond profit as their sole objective. Once a business reaches a stable level of profitability, it must scale with a broader purpose that balances the interests of employees, suppliers, investors and society. “If profit remains the only driver, you will not scale,” he said.

regulatory compliance

He also stressed the importance of strong governance and regulatory compliance, calling them investments rather than costs. High standards of governance build credibility with investors and lenders, making it easier for companies to raise capital and pursue long-term growth. He gave the example of his own company, whose share prices are ruling at around 45 times earnings. He said the high PE showed the faith the investors had in the numbers the company published.

India’s ambition of becoming a developed nation, he added, would depend not only on higher GDP but also on building innovative, globally competitive businesses that create value for all stakeholders.

Published on June 27, 2026