Ajax Engineering Limited (AJAXENGG) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '26 Earnings Conference Call of Ajax Engineering Limited. Please note that this conference is being recorded. Before we begin, I would like to point out that this conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements do not guarantee the future performance of the company, and it involves risks and uncertainties that are difficult to predict. I now hand the conference over to Mr. Shubhabrata Saha, Managing Director and Chief Executive Officer of Ajax Engineering Limited. Thank you, and over to you, sir.

Thank you. Good afternoon, everybody. Thank you for joining us on Ajax Engineering Limited's Q1 FY '26 Earnings Conference Call. Along with me on the call, we have our CFO, Mr. Tuhin Basu; and SGA, our Investor Relations partner. We have uploaded our results and investor presentation on the stock exchanges and on our website. I hope everybody has had an opportunity to go through the same. Before we dive into this quarter's performance, I would like to take a moment to reflect on Ajax's journey. Spanning over 3 decades, Ajax has demonstrated remarkable resilience and adaptability through multiple business cycles and challenging phases. The first 22 years laid a solid foundation. And over the past 10, 11 years, we've successfully navigated critical disruptions that included demonetization, introduction of the GST, COVID-19 pandemic, election cycles in the center and the state, changes in emission regulations and, of course, sector cyclicality. Through this last decade, Ajax has delivered an impressive 18% revenue CAGR, which is a testament to our unwavering focus on operational preparedness, precise execution and financial discipline. These qualities continue to empower us to not only withstand adversity but emerge from it stronger than before. We had the last emission transition in FY '21, '22. Over the next 3 years between FY '22 to '25, we delivered a robust CAGR of 40%. This strong trajectory underscores the same foundational qualities I had mentioned earlier, which is about operational preparedness, executional precision, and financial discipline that define who we are and continue to drive our success. The last fiscal has been no different in terms of the external challenges we faced, but true to form, Ajax has continued to navigate these headwinds with focus and resilience. In the given context, we delivered a healthy performance in FY '25, clocking 19% revenue growth, driven by our volumes. Our core segment, that is, SLCMs performed well. A key highlight was the successful launch of our new CEV-5 emission compliant machine in Q4 FY '25. At the same time, our spares and services business is gaining steady traction and showing promising progress. In line with our strategic focus, we are consistently working to scale up our non-SLCM segment, which is also gaining positive momentum. I'd like to highlight some of the recent initiatives we've taken to strengthen our capabilities and build organizational competency. Number one, the launch of the CEV-5 compliant SLCM portfolio with enhanced value proposition. In addition to the expansion of our dealer network, we've been augmenting our go-to-market strategy by building a B2B channel in the top 8 metro cities where we are operational. Our focus is in the -- our focus or our value proposition in the non-SLCM business is to offer better reliability, reduced downtime, lower operating costs and ready availability of spare parts and machine service. A strong B2B channel, combined with our dealer channel will be a key growth driver for our non-SLCM business. We also have our new facility coming up in Adhiarayanahosahali, which is very close to our Obadenahalli plant, which produces SLCMs. This we expect to commission in the second half of FY '26. Let me now take you through the current business landscape and outlook. We observed that the on-ground execution of infrastructure projects have had a slowdown. For example, in case of PMGSY, the length of road constructed has reduced by 37% from FY '24 to '25. The pace of construction of highways similarly has reduced by about 9% from '24 to '25. Additionally, the unseasonal rainfall in the month of May in many parts of the country and cash flow delays experienced by our customers did not help with the industry demand. Our business anyways is skewed towards the second half of the fiscal with around 65% of our annual revenue coming in the second half. The unseasonal rain, the transition to the new emission norms and a slower pace of project execution have all had an impact on the business in Q1 FY '26. I'd like to highlight some pertinent aspects of the regulatory transition of emission norms. The shift from CEV-4 to CEV-5 emission standard effective 1st of July 2025 has had a notable impact on the industry in the last few quarters. Regulations permitted the manufacture of CEV-4 compliant machines until December 2024 with sales and associated registration allowed until 30th of June 2025. Riding on our situational awareness, operational preparedness and technology-driven manufacturing capabilities, we were ready ahead of the curve. And as a result, we had a promising launch of our CEV-5 machines in the last quarter. The CEV-4 inventory, which we had built up until December 2024 was largely cleared in Q4 FY '25 and the balance was completely sold out in Q1 FY '26. With the 30th June deadline looming for the sale of CEV-4 machines, we witnessed some highly unsustainable business practices in the industry during Q1. However, we continue to maintain our financial discipline during this period. Also, we continue to see reasonable momentum in our CEV-5 portfolio during the quarter. We believe that the decline in the overall market share in the SLCM segment that you see in this quarter is only a temporary phase, driven by the reasons which I have just mentioned. In the CEV-5 portfolio, our market share remains broadly in line with the historical levels seen in the overall SLCM segment previously. With only CEV-5 machines permitted to be sold now onwards, we expect our overall market share in SLCMs to revert to the erstwhile range as we go deeper into the year. An example of this is clearly a strong performance in terms of market share demonstrated in the month of July. The implementation of the new emission norms has also led to an impact on the cost front. The transition to CEV-5 standards has led to an increase in the material cost, leading to an impact on the gross margin on a Y-o-Y basis. Our pricing strategy will be very carefully calibrated after taking into account the market response and elasticity to the new CEV-5 compliant machine. During FY '26, both CEV-4 and CEV-5 -- sorry, during Q1 FY '26, both CEV-4 and CEV-5 models were available in the market. However, starting Q2 FY '26, only CEV-5 machines will be on offer. The transition will allow us to gauge customer response more clearly. We expect to gain a better understanding of the adoption trends and pace of the pickup of CEV-5 machines while entering the third quarter after the peak monsoon period. That will be crucial in taking an informed decision on the pricing strategy. Short-term road bumps like these are typical in our industry, and Ajax has consistently demonstrated the ability to navigate such phases while maintaining steady performance. As we've emphasized in the past, the business is best viewed on an annualized basis rather than quarterly. Structurally, we remain fully confident in the longer-term growth trajectory of our business. India's substantial infrastructure development needs, coupled with the shift towards mechanized construction and concreting equipment will continue to drive steady demand, which positions Ajax well for sustained growth. Our long-term outlook on both growth and profitability remains firmly intact. We remain committed to maintaining our leadership position in the SLCM segment while also building strong capabilities in the non-SLCM space. Operational excellence and financial discipline remains central to our strategy. We continue to have a robust cash position, ensuring considerable financial muscle to pursue our growth ambitions. With this, I'd like to hand over the call to Tuhin to take you through the operational and financial performance. Thank you, and over to Tuhin.

Thank you, Shubho. Good afternoon, and a warm welcome to everybody on our Q1 FY '26 earnings call. I'll speak on the quarterly numbers. Revenue from operations for Q1 FY '26 stood at INR 467 crores and remains flat as compared to the INR 469 crores in Q1 FY '25. Volume and revenue in SLCM segment was flat on a year-on-year basis with revenue standing at INR 385 crores in Q1 FY '26 versus INR 386 crores in Q1 FY '25. On the non-SLCM front, the volumes grew by 25% on year-on-year basis. However, the revenue declined by 8% due to the product mix change. It is important to note that we had sale of our slip-form pavers in Q1 of last year, which is a high ticket size product, and that was absent in Q1 of FY '26, resulting in the decline of revenue. Revenue from Spares & Service business has seen a growth of 8% on year-on-year basis and stood at INR 37 crores in Q1 FY '26. Exports contributed 5% of the total revenue in Q1 FY '26. Gross margin for Q1 FY '26 stood at 25.8% compared to 30.3% in Q1 FY '25. Considerable portion on the year-on-year decline is gross margin on account of the product mix, which I just mentioned and pavers played a big part given our big-ticket size and a relatively high-margin product. There was also some impact due to the increase in production costs for the CEV-5 machines, which were not manufactured in Q1 of last year. And as Shubho mentioned, that pricing is something which we will monitor on a close call and take decisions thereof as we progress during the year. On a year-on-year basis, the impact on the gross profit and margin has percolated down to EBITDA as well. EBITDA for the quarter stood at INR 61 crores compared to INR 80 crores in Q1 FY '25, a decline of 23%. EBITDA margin this quarter stood at 13.2% versus 17.1% in Q1 FY '25. Looking at EBITDA margin sequentially would not be justified due to the inherent quarterly seasonality of the business, which also impacts operating leverage for us. Profit after tax for the quarter stood at INR 53 crores versus INR 67 crores in Q1 FY '25. We'll again reiterate what Shubho mentioned that our business has to be looked at an annualized basis instead of a quarterly basis at a point in time. On the balance sheet front, we continue to remain debt-free and have a very strong cash position. With that, I open the floor for questions. Thank you.

[Operator Instructions] The first question is from the line of Mohit Kumar from ICICI Securities.

My first question is, sir, is it possible to help us with the mix of non-SLCM in the quarter vis-a-vis last quarter as the base year? And what explains strong volume growth qualitatively, this segment grew faster in the quarter? Are you happy with the development of B2B channel?

Mohit, your voice was not completely clear, but I'm just paraphrasing what we heard at our end. You want to understand the Q1 FY '26, let's say, revenue mix on the non-SLCM portfolio, right?

Absolutely, sir. Yes.

So on the non-SLCM front, as I mentioned in my opening remarks as well that pavers last year played a significant part, and that had a contribution to the revenue. This time, volume growth has been driven by batching plants and associated transit mixes. And that kind of also cements, let's say, what we have been consistently mentioning that we will continue to have specific focus on the non-SLCM portfolio. And the volume growth, which you see this year of about 25% is coming from those, let's say, batching plant and associated products like transit mixes, which are sold alongside the batching plants.

Understood, sir. My second question is what was the mix of CEV-4 and CEV-5 in the quarter?

So CEV-5 in Q1 contributed, let's say, 300 -- roughly INR 300-plus crores of revenue versus CEV-4 of around INR 25 crores. So that kind of gives you that 90-10 broadly is the revenue mix of CEV-5 and CEV-4 in Q1.

The next question is from the line of Raghunandhan from Nuvama Research.

And for clarifying on market share for Q1. So firstly, on the acceptance of smaller SLCM, where you had been doing pilot projects, how do you see the initial feedback? By when do you see the product available across the country? How do you see that as being a market share trigger in the future?

You have lots of questions in one question, Raghu, but I'll still try to attempt answering each of them. Happy to say that I think the initial test validation and the feedback mechanism seems to have gone reasonably well from the product point of view, which gives us some confidence, and we have started doing some kind of very soft launches with some select dealers in specific markets. And this is, as you know, is the rainfall season. So obviously, the quantum of work that these machines will do will be limited. But I think it's important for the dealers to have a good look and feel, understand the product, start looking at these segments which have been hitherto unaddressed by them in terms of building contractors and people who would actually lay roofs and so on and so forth. So I think this is at an early stage. I think come the second half of the year, we would definitely want greater proliferation of these machines across the country once we have done this test with at least the first 25, 30 dealers to begin with. As far as the market share trigger is concerned, I think let this phase of the dealers getting used to this machine, working out the customer segments that they need to work with, which were not the same segment that possibly they would have been used to as far as sale of ARGOs is concerned, I feel reasonably confident as time moves along.

Secondly, in terms of CEV-5. So gross margin has broadly come off by about 400 bps. I'm assuming that is the quantum of under-recoveries because of CEV-5. So time permitting, would you look at taking that 3%, 4% kind of a price hike over next few quarters based on market conditions? Or would you partially try to manage it by cost reduction activities?

So Raghu, two things. I'll maybe I'll start the clarification on the gross margin first. See, if you look at Q1 versus Q1, then you see roughly a 5% or 4.5% share, which is what, let's say, you're referring to the 30.3% versus the 25.8% this year, whereas paver did play a significant part. So if I look at the full year of FY '25, which was in the range of 27 and we have got 25 plus, let's say, for the quarter. So the price increase or rather the cost increase is not the only driver in terms of the dip in the gross margin, which you experienced or let's say, which we see in Q1 FY '26. The 450 basis points, I will attribute roughly 50-50 or 60-40, 60% to the DMC or Direct Material Cost change for the CEV-5 and the paver kind of having a significant contribution as well in terms of the gross margin decline. In terms of the pricing increase, I think we have been transparent and consistent over the last several conversations with all of you that we will have a closer look at the pricing as we progress in the year. We anticipate that we will be able to start nudging the pricing up towards end of Q2. The reason being that Q1, both the type of machines were available in the market, CEV-4 and CEV-5. And that obviously impacts or impinges our effort in terms of increasing the pricing when both these variants are available. July, August, we expect to be more tempered in terms of demand. And once the market kind of gets back to demand, let's say, after Janmashtami, Ganesh Chaturthi, which is more towards the end of Q2, that's when we would be able to push the pricing up as we progress into the market. So while we would not be able to give a very sacrosanct view of how much we will be successful, all we can say is that we will try to bring the margin back to the corridors which we have experienced previously.

And any thoughts you can share on the dividend payout policy and utilization of the large cash reserves? And also any thoughts on using the cash for M&A?

So on the dividend, I think the company has declared dividend only twice in almost a decade. One was in 2018, '19 time period and one was in '25. So sorry, one was in '24, we paid out in '25. And it's a topic which we obviously keep in our minds. We have a dividend distribution policy. At the current time, the Board has not decided to go forward with the dividend for a reason that we are in a growth phase, and they believe that the management and collectively, the company should reinvest the money to funnel the growth phase, whether it's organic or inorganic. And I'm using the word inorganic a bit broadly because it need not be a plain vanilla old school acquisition. It could be a different corporate development structure. And hence, we are, of course, looking at options. We have looked at options in the last 6 months. A few of them do not match our expected guardrails and corridors. And hence, we are also not going forward with them. So it's an active topic for us. It's a topic which we are seeking, let's say, advisement from different people, but we are also very clear in terms of what we will not do from a financial and business prudence standpoint. And hence, you do not see the cash getting deployed yet. But we are in the lookout, and we will, of course, keep you posted once, let's say, there are things more sacrosanct, which we have been able to button down, and we believe that's the right thing for the company to do.

The next question is from the line of Pritesh from Lucky Investments.

Just a clarification first. So based on your comments and now this quarter where 90% of the SLCM revenue is from CEV-5 machine. And when you mentioned that the GP way to look at is half GP impact is because of the product mix of non-SLCM. So when you adjust that basically from this quarter, your margin is similar to what you did in last full year with this quarter having a full SLCM, largely a full SLCM-based revenues, for the CEV-5 based SLCM revenues. Is this correct in our understanding?

So not completely there. So if I see last year, it was 27% in a full year, the impact of pavers obviously get diluted. One quarter, it had over, let's say, a disproportionate impact for 1 quarter. But for the full year, the 27%, which was there in FY '25 is, let's say, the baseline gross margin. If I ignore the paver, I think we will still be about 150 to 200 basis points short on the gross margin. So from that standpoint, Pritesh, we have eroded the gross margin for the quarter, selling the new machines where we have not been able to push the pricing up. And then as we progress during the year, we will see how do we adjust the pricing so that we are able to claw it back as much as possible. So I wouldn't say that if the payables are not there, we are exactly at that corridor. We are, of course, lower by about 150, 200 basis points.

Okay. Just that you are a lean quarter and I just added the 200 bps back to the EBITDA margin of this quarter...

EBITDA, not gross margin.

So as soon I adjust that 225 basis points to the EBITDA margin reported, I am at 15%, which is similar to what we did last year. Now this is after the fact that from that only...

Understood. So on the EBITDA, I think, yes, as we progress, the volume will play a part. If you see our employee cost as a percentage of sales, just as a proxy, which I wanted to call out, it's in the range of 6-plus percentage, which will normalize more towards what FY '25 was. So yes, to that extent, you can say that the EBITDA will start getting closer to the 15%. That's correct.

Okay. The other question is it is closer to 15% even this quarter, actually, adjusting for the product mix.

It is yes, and the volume, correct.

Correct. Okay. Now my second question is, with SLCM with the CEV-5 machine already being a larger portion of this quarter, I could understand the 3% price decline in SLCM. So if you could throw some light there?

So that is purely because of the volume mix. See, we have a very wide range of SLCM capacities. ARGO 2 series, ARGO 4 series have very different price points given just the throughput they have. So that obviously plays a part in terms of when we just divide the quantity and the value. So that is essentially because of that. It's not a secular decline of 3% across all models which we have experienced in this quarter. That's not the case.

Okay. And can you quantify the extent of cost increases on account of the CEV-5 emission change?

On a blended level, it's just about 400 basis points direct material or at that direct material cost, yes.

Okay. And my other question is, what is the progress now on the machines with voice, which you are supposed to introduce in the market?

Pritesh, I had just answered that question in a previous conversation where I had mentioned that we took up a beachhead market. We did test and validation. We took consumer feedback and stuff like that, which gave us a degree of confidence for us to have a soft launch with about 15, 20 dealers based across various locations in the country. Given the fact that we are in the thick of the monsoon season, the quantum of throughput to be done through these machines will be limited, but I think it's important for the dealers to start understanding and conversing with a completely new set of, let us say, target audience in this category to be ready to be able to push out volumes in the next few months when the second half of the year begins, which is when we see greater traction in these activities.

Okay. And my last question is what kind of revenue growth or volume growth do you see for FY '26 considering the transitions on emission, how the market is playing out? Do you see yourself closer to your long-term CAGR of 18%, which you mentioned earlier...

I think we don't typically give a forward-looking sacrosanct statement. But Pritesh, just to call it out that we don't anticipate the volume growth to be 18% this year. We expect it to be more, let's say, in the early double digits. But yes, I mean, the 18% was also not every year clockwork. It was block of years. So these -- some years of low double digit and some years of high double digit or, let's say, high teens will cover the CAGR to 18% in a block of few years. On a lighter note, Pritesh, I think the onset of Ganapathy and his arrival will augur for good times, if you will.

Hopefully, sir. Yes, please go ahead, sir. You wanted to mention something, sir.

I mean, no, I think Shubho mentioned in his opening remarks as well that we do see a slight tepidness in the progress of some of the infra projects, and that obviously impacts the cash flow for the contractors as well, which is also representative of sorts in terms of the volume which we have experienced in Q1 of FY '25. So considering those aspects and the volume upswing only expected more towards end of Q2, I think early double digit is what we will expect on the volume front.

[Operator Instructions] The next question is from the line of Sankaranarayanan from ithoughtPMS.

Sir, my first question is regarding the customer acceptance of our latest CEV-5 machines and how well our customers are accepting? And is there any price difference compared to CEV-4 machines? My second question is that apart from emission changes that you have done, have you done any other modifications in the latest machines?

Okay. So I think let me take -- there are 2 parts to this actually 3 questions in the same. As far as acceptance is concerned, I think I did mention about the fact that in Q4 FY '25 itself, 1/3 of our volumes came from the CEV-5 category. We believe and Tuhin has also spoken about the volume mix of CEV-4 and CEV-5 in the first quarter of FY '26 as well. So clearly, we've done our homework very well in terms of our operational preparedness and getting the machine right when we put it out in the market. And the best way to compare this is, did we receive any significant complaints? Did customers have any challenges? Was the machine not operating to its specs and so on and so forth? Happy to report back that the strong test and validation mechanism that we had put out based on our learning from the previous transition that took place in FY '21 and '22, the machine performance has been quite good so far. So that is the first part. I think Tuhin has also spoken about the pricing and the impact of pricing on the margins in the first quarter between all that was sold for both for CEV-4 and CEV-5. As far as the product value proposition is concerned, clearly, the product value proposition is stronger. We worked very strongly with all the suppliers. For example, if you look at the product nomenclature, the nomenclature has also shifted in certain cases. Our old 4,300 has become 4,500. We've introduced a 3,000 and so on and so forth, which actually addresses some of the gaps that may have existed in the portfolio and the way customers will look at it in terms of the throughput that the machine provides and the value, therefore, to them on a cubic capacity basis every time that they use these machines. And this so far has turned out to be good. If you look at it in terms of machine performance, many of the machines initially that were put out in the marketplace have already completed 500 hours. And that's a good number to have in terms of operational capabilities of the machine, redressal of anything that has arisen. We haven't seen anything very significant to upset our sleep.

Got it, sir. Sir, and still we maintain a premium compared to other competitors, SLCM, right, sir?

Our intent has been that, and our intent will continue to be that.

[Operator Instructions] The next question is from the line of Vaibhav Shah from JM Financial.

Firstly, what was the paver revenue in Q1 last year in FY '25?

Vaibhav, it was [ 140 million ] plus.

Okay. Okay. Sir, second, you mentioned that we have switched from 4,300 to 4,500 and we have reduced ARGO 3,000. So has ARGO 3000 replaced any older machine or we have other machines as well?

Yes, it has. So 2,800 has moved to 3,000.

So now we have reached 2,300 and 3,000, 4,500 and 4,800?

So 2,000, 2,500, 3,000, 4,000, 4,500, 4,800.

Okay. Okay. And sir, any -- what is our market share right now in SLCM? And how do we see it maintaining ahead?

Can you come back again?

Our SLCM market share right now?

Yes. So I think as far as July is concerned, I think we've returned back with a very strong number, upwards of 75%. So that is something good to have, especially during a quarter where we did see some unsustainable business practices, and we didn't want to walk down that path.

Okay. And sir, lastly, how do you see the realizations moving forward, especially for the SLCM business? In Q1, it was flattish. So it should be a similar trend for the entire year or there may be some cuts for the year?

So I think we called it out during our initial speech. I think pricing is something that we will follow through very actively. We need to look at the current demand scenario in the marketplace. And basis that, I think we will take prudent calls to make sure that our financial position continues to remain strong. I think financial discipline at Ajax has remained the cornerstone of how we've done business, and we'll continue to make sure that we do that.

Sir, and lastly, on the ARGO mix, so it should be similar to 50-50 for the lower end and the higher end in terms of sizes, drum sizes...

I think it's very early to call anything out at this stage. See, there are 2 parts to it. It's very early to call out anything at this stage. We'll also have to look at very clearly, there are states which are 2 series states. There are states which are driven more by the 4 series, et cetera. If we see that certain states are not doing as well as the other states, I mean, who knows how it will all pan out. We are only hoping and expecting that the government's emphasis on putting infrastructure back on track, getting cash flows on track, we will see a more secular trend in terms of growth across all states.

The next question is from the line of Mayank Bhandari from Asian Market Securities.

Just checking, you've given a very diverse customer base in your presentation, in which you've categorized 5 categories, individual contractors, small, midsized contractor firms. Is it possible to give any breakdown around that?

So I think in the past, we've given a broad breakdown, but I think this is too early for us to really call out as to how the whole structure will pan out from a CEV-5 perspective. But I think on a very broad basis, we used to call it out as a 30, 30, 40 kind of a scenario depending upon how it kind of plays out. So I think it's too early for us to even say anything at this stage with these new products being on the anvil.

Okay. So this mix, what was it earlier, if I may ask?

So you can assume roughly about 40% coming in from the first-time buyers, about 30% coming in from people who are small and midsized contractors and about 30% coming in from rental companies, which we believe is a very good mix.

And Mayank, just to clarify, the government construction agencies do not directly buy from us, it is routed through the contractors...

No, that's quite helpful. And secondly, sir, you highlighted about spending in on Pradhan Mantri Gram Sadak Yojana going down by 30%. So you are referring to which period, it last couple of quarters or...

We are talking about '24 and '25. And I had put that very clearly during my initial conversation, the PMGSY length of road construction between '24 and '25, FY '24 and FY '25...

Okay. Okay. And like -- so there is not much visibility around that for next 2 years? Or how is it?

I can't comment on what will happen in the next 2 years. But very clearly, this is data from the past, which has had some kind of an impact in terms of the absolute quantum of work available with contractors.

Okay. Okay. And sir, just one thing, one clarification. If I see VAHAN data, and if I see July month data, we are seeing very sharp fall in July month for Ajax as well as for the transport category of construction vehicle, which is -- I mean, even Y-o-Y, it has declined by almost 50% kind of. So would you be able to comment on that for the July month?

Mayank, Q1 was a special quarter. And I'm using the word special quarter literally. See, in ordinarily, you will have a time lag when you do your first sale, which is the wholesale from us to the dealers and the final registration of the machines. In this quarter, it had the registrations of what happened in Q4. So let's say, the March vehicles for sure, the registration happened in Q1 this year. And then given the regulations were coming through, most of the CEV-4 machines, not most, all had to be registered within this quarter itself. That's why you see that the lag effect, which is there typically experienced in the industry is not as wider in the Q1. So Q1 had both the April, May, June, all the CEV-4 machines and the CEV-4 machines, which have got sold previously and CEV-5 machines also which were sold previously. Now for the sales of CEV-5, then that natural cycle of 30 to 45 days of registration time kicks in. And hence, that will happen over time. So I don't think we need to have a very, let's say, excited view on the -- on this particular registration number of June or Q1, given the special circumstance we and the rest of the industry was in.

Okay. I was referring to the July number, if you...

I know, but that's precisely the reason I'm saying that June will have June -- April, May, June and March. And July will have only 1 month because CEV-4 machines all would have been sold. And ordinarily, we will have those machines percolating through every month. Now it is only CEV-5. And CEV-5, whatever we have sold, we see that the registrations have not happened for the full stock in any case. So that will happen over time. So once we are end of the quarter of, let's say, the Q2 and then the Q2, when we publish our results, you will see the number of machines, et cetera, getting more in sync with the VAHAN registration as was there in previous quarters and years.

I see. So basically, registrations were front-loaded in all the categories in April, May...

The next question is from the line of Balasubramanian from Arihant Capital Markets Limited.

Sir, my first question regarding this hybrid dealer B2B model covers 8 markets. How do you balance channel conflict? And what is the revenue contribution target from B2B from FY '26 onwards?

So I think clearly, the B2B channel is there in only the top 8 markets, number one. Number two, typically, these buyers are substantially larger, and they typically would like to deal with the company directly, right? The third facet is that our dealers provide the installation, the support services whenever and wherever there is required. So there is no real conflict of interest in those areas because these are customers that would want to deal directly with the company. As far as the rest of the customer base is concerned, clearly, there is enough opportunity for the dealers to take advantage of. So there is no real conflict of interest between the 2 channels that we have.

Okay, sir. Sir, on exports around 5% of the sales, which are the regions we are prioritized for scalable growth, example, Africa, Russia. And secondly, 3D concrete printers and slip-form pavers are niche innovations, what are the revenue contributions and how they are scalable?

Okay. So since you asked about exports, first, clearly, our markets are South Asia, Southeast Asia, Africa, Middle East, Central America, Caribbean, et cetera. And the progress across those markets will continue. You also mentioned about Russia because that's the market where we sold our pavers, right, and that was last year. So our focus across these geographies will continue to happen. We are living in a world order where the current -- the country risk and the currency risk is something that we need to continuously evaluate when we do business. We've seen in the past that when we identify strategic markets, the markets don't turn out to be as strategic as we would like them to because of the nature of the world economics and geopolitics around us. So we are very clear that we don't take either currency risk or country risk and we look at suitable opportunities when we do the business from an export standpoint. So that's the first part. As far as pavers is concerned, clearly, we are on a continuous lookout on opportunities to do paver business on a slightly more consistent basis as time goes along. So we would definitely like to report back whenever that arises. As far as 3D printing opportunity is concerned, again, I think our products are well received. The project that we did with one of India's largest engineering companies was also very well received. I think this will see its own inflection point as time goes along. And as you know that AJAX School of Concrete is working extensively in the area of material science. We are trying out quite a few things. Incidentally, it is quite possible that when we inaugurate our Hosahalli plant, you might see a structure which is made out of our own 3D printed fees. So that will be the most efficient way of discussing proof of the pudding, so to say.

The next question is from the line of Rahul Kumar from Vaikarya.

The question is how much of the cost increase of this transition from CEV-3 to 5 and 4 to 5 has been passed to the end consumers?

I think we spoke at length on this. At this point in time, given both the machines were there in the market in Q1 and also in Q4 when we launched our first lot of CEV-5, the pricing shift has not started to happen in the manner which we expect. We will look at it towards the end of Q2.

Okay. Okay. And second question is, again, I'm sorry if you have already answered this, but what percentage of your sales was CEV-5 this quarter?

The question was answered, but happy to repeat it. We had INR 310 crores of CEV-5 sales and CEV-4 sales were INR 25 crores, so 90-10.

The next question is from the line of Nidhi Shah from ICICI Securities.

So while we have discussed the possibility of a price hike at length, I just wanted to know other than...

Your voice is kind of coming in and out. We are unable to hear you clearly. If you can just repeat your question.

Am I audible now?

Yes, better, please.

Yes. So while we have discussed the possibility of a price hike at length, I just wanted to understand that other than the customer appetite and our input costs, what other factors would we be looking at when we would be deciding the price hike strategy? That is -- that's my first question.

See, we have to also see how the competition is, right? We are selling at a premium. Shubho mentioned it in one of the questions asked to him. And if the competition for whatever reason, and we have seen bizarre behavior in the first quarter, -- we don't anticipate the competition to behave in the same way. But let's -- in a situation they do, we will also be mindful as to how much of price delta we have versus our competition, and that will drive certain decisions at our end. So it will be a balanced approach, and then we will see where it lands. That's going to be a driver for sure.

Secondly, you mentioned that 90% of our sales in Q1 were coming from the CEV-5. Now I wanted to understand what were some of the reasons why this happened? Is that because we had lower inventory of CEV-4 on our end and the customer would prefer to stick with us rather than move to another player for their need? Or is it that CEV-5 was from our end coming at the same price that probably CEV-4 was? So what was -- from your understanding, what led to the fact that we were able to make 90% of our sales CEV-5 regardless of the fact that the deadline was actually in June?

I think we have to kind of go back to Q4. Q4 already 30% was sold of CEV-5. And that was done with a strategic view that we get into the market earlier. The customers and the end consumers start to experience our machine, and that obviously allowed us to push CEV-5 also with equal earnest in Q1. And that contributed, of course, let's say, the stickiness with the customer because they trusted the machine, they've seen the machine in action. And of course, our customers also go with the brand name, which has been created over years. So combination of these 2 resulted in CEV-5 being the dominant machine.

The next question is from the line of Raghunandhan from Nuvama Research.

One question. On other expenses, there was a dip of 17% Y-o-Y. What factors led to this decline? Any cost saving benefits which can be sustained?

So Raghu, in Q1 of FY '25, we had, let's say, a onetime expense on certain business promotional activity, which in Q1 FY '26, we do not have. If needed to have a separate specific business promotion, we will do it on the merits of this business case. But in Q1 FY '26, we didn't feel that there is a need for it. Hence, we have not spent the money. Whether it's sustainable or not, I think in the Q2 -- after Q2, we will definitely be able to tell whether we need to spend this secularly or not this year.

The next question is from the line of Raashi Chopra from Citigroup.

Can you hear me now? So just a couple of questions. On the cost side, you've taken the hit on gross margins now, but is -- are there any incremental costs beyond this for the transition? Or is this something that we kind of work with as a constant...

I think because of transition, answer is no, Raashi. I think we have maintained that it will be in the range of 400 basis points. It's in that range. So there is no change which we expect because of the transition. The commodity pricing, of course, is an impact which we can't foretell, and I will not like to speculate on it. But if that changes, that can have a bearing, but that is not because of transition. That would have probably had an impact even outside transition.

Right. And in order for you to kind of recover the market share, would you need to go back to like additional expenses like you did last year in terms of branding marketing, et cetera?

Well, at least we have not spent that money in Q1, and Shubho mentioned that July, we are already back at 75-plus percentage. So hopefully, let's say, actions on the ground should push it through. But if there is something specific which we need to do to increase customer engagement and entrenchment, we will take that business call based on the specific metrics at that time.

Sorry, Raashi, it's important for the activity level as far as project execution on ground is concerned to come back stronger as much as we expect cash flows to the contractors to be provided in certain cases, the overdues in certain cases on time.

Understood. Okay. And cash balance as of June?

Cash balance as of June, we have -- I mean, the investments portfolio was about INR 650 crores, and we had about INR 30 crores, which was in sweep-in accounts.

The last question is from Krupanshu from Thinqwise Wealth.

Just a few data-keeping questions. So could you give us the volume figures for CEV-5 and CEV-4 SLCM machines? And also in the non-SLCM mix, you mentioned that batching plant and transit mixers was a majority of our mix. But even for that, could you break it up, please, in revenue and volume terms?

So as we have disclosed previously, we will not give segmental volumes for the non-SLCM. This is not an identified KPI by the company. So we will report it the way we are doing it for -- as part of our earnings presentation. On the CEV-5, CEV-4, I can lay out the volumes. CEV-5, we sold 883 machines and CEV-4, 93...

Ladies and gentlemen, due to time constraints, we will take that as the last question. I now hand the conference over to management for closing comments.

Thank you all for joining us on today's call. We hope that we've been able to address all your questions. For any further queries or clarifications, please feel free to connect with us or SGA, which is our Investor Relations partner. Thank you once again.

Thank you. Ladies and gentlemen, on behalf of Ajax Engineering Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.