Kellton Tech and Zensar Technologies, two AI-linked IT companies in India, have seen significant share price drops amid questions over their financial health and growth prospects, highlighting the risks beneath AI hype.
Artificial intelligence may be powering a fresh wave of optimism across India’s technology sector, but it has not stopped two AI-linked IT stocks from falling sharply. Kellton Tech and Zensar Technologies have both been marked down by investors even as they push deeper into AI services, raising a familiar question: bargain opportunity or value trap?
Hyderabad-based Kellton Tech, a digital transformation specialist with most of its revenue coming from the United States, has seen its share price sink to around ₹14.2 on August 6, leaving it roughly 51% below its 52-week high. The company says digital transformation accounted for 84% of business in the June 2026 quarter and points to partnerships with Microsoft, Amazon Web Services and SAP. It also launched Phoenix.AI and Structi.AI in the latest quarter. Yet the market is focusing less on the AI narrative and more on the weak financial conversion beneath it. Revenue rose from ₹776 crore in FY21 to ₹1,217 crore in FY26, but EBITDA increased only from ₹108 crore to ₹135 crore over the same period, while operating cash flow was negative ₹10 crore and free cash flow was negative ₹208 crore in FY26, according to the company’s reported figures.
There are also balance-sheet and ownership concerns. Promoter holding fell from 52.14% in June 2023 to 37.67% by March 2026, and debtor days widened from 96 in FY20 to 118 in FY26, suggesting cash is taking longer to come in even as sales grow. On that basis, Kellton’s valuation of about 8 times earnings looks cheap against an industry median of 26 times, but the market appears unconvinced that the discount is enough to offset the execution risks.
Zensar Technologies presents a very different picture. The Pune-based mid-cap, part of the RPG Group, has almost no debt and ended the June 2026 quarter with net cash of about $319.5 million, or more than ₹2,600 crore, according to its results release. The company said 85% of its workforce is now AI-certified and that it has been building AI products under its Zensar.AI umbrella, including an AI agent platform and tools for insurance clients. Revenue for FY26 came in at $643.7 million, up 3.1% in reported currency, while the March quarter delivered $158.4 million in revenue and profit after tax equal to 14.4% of sales.
Business Standard reported that Zensar’s consolidated net profit rose 19.39% to ₹210.60 crore in the March 2026 quarter, while full-year profit climbed 19.21% to ₹774.60 crore and annual sales increased 7.70% to ₹5,687.40 crore. The company also reported an order book of $401.8 million at the end of FY26, up 122.9% sequentially, though recent order intake had softened to $149.2 million in the June quarter, one of its weaker recent readings. Foreign institutional investor ownership has also slipped to 10.7%, a reminder that even strong cash generation does not guarantee sustained market enthusiasm.
For investors, the message is less about AI hype than about business quality. Kellton Tech offers the appeal of a low valuation, but its cash generation, promoter selling and working-capital strain make the discount look less persuasive. Zensar, meanwhile, combines AI adoption, a near debt-free balance sheet and strong cash reserves, but it still needs to prove that revenue growth and order momentum can accelerate. In both cases, the fall in share price may be tempting, but the real test remains whether the businesses can turn AI positioning into durable profits and cash flow.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
