2 AI stocks down up to 50%: Hidden bargains or classic value traps?

Now here is the twist. Neither name has a famous investor on the register to lend comfort. But the public holding has been growing in small numbers in the last year.

But given that AI is one of the hottest themes in the Indian markets, these stocks are drawing attention from smart investors. They have the data, the stories, two very different balance sheets, and one brutal correction that has put both on the same screen.

#1 Kellton Tech: The Microcap AI Plumber Trading Below Book Value

Kellton Tech is a Hyderabad-based digital transformation company with clients across the US, Europe, India and Asia-Pacific. The US alone brings in 81.5% of revenue, and digital transformation work makes up 84% of the business as per the June 2026 quarter presentation.

The company has partnerships with some of the biggest names of the tech space like Microsoft, Amazon Web Services and SAP.

The AI story here is not a slide in an investor deck. It is a product list. During the June 2026 quarter, the company launched Phoenix.ai, a platform that uses AI agents to break old monolithic enterprise software into modern cloud-native pieces. It also rolled out Structi.ai, an engine that turns unstructured data into inputs AI systems can use.

It attained Select Tier partner status on the Snowflake AI Data Cloud. And it deployed its Optima digital oilfield platform for Oil India, putting 77 production wells under real-time monitoring within six months of starting work.

That is real AI plumbing for real clients in energy, banking, agriculture and industrial services. So why has the stock halved?

Steady Top-Line, Stagnant Margins

Let us look at the 5-year financials to get a view of how the company has been doing in the last 5 years

Financial Year	FY21	FY22	FY23	FY24	FY25	FY26	5Y CAGR
Sales (Rs cr)	776	843	917	983	1,098	1,217	9%
EBITDA (Rs cr)	108	105	93	104	128	135	5%
Net Profit (Rs cr)	71	70	-127	64	80	92	5%

EBITDA refers to operating profit before other income. One-off disclosure: the FY23 loss of Rs 127 cr came from a negative other income entry of Rs 182 cr, a non-cash write-down. Operating profit stayed positive at Rs 93 cr that year. Net profit CAGR is computed on reported figures and includes the recovery from that base.

A 9% sales CAGR is modest for a company that talks AI. The trailing twelve months show sales of Rs 1,237 cr and net profit of Rs 91 cr, a thin 7.4% margin. The June 2026 quarter brought sales of Rs 316 cr, up 6.8% on the year, with net profit of Rs 22 cr. Steady, not spectacular.

The 8x PE Multiple: A Hidden Gem or a Value Trap?

The share price of Kellton Tech Solutions was around Rs 11 in August 2021 and as of closing on 6th August 2026 it was Rs 14.2.

As for the valuations, the company’ share is trading at a PE of 8x and the industry median currently is 26x. The 10-Year median PE for the company is 9x while the industry median for the same period is 28x.

Here is where it gets interesting. At Rs 14.2, Kellton trades at 0.93 times its book value of Rs 15.2 per share. The stock price CAGR over ten years is negative 1%, and the last one year alone wiped out 46%. The market cap now stands at Rs 752 cr against annual sales of Rs 1,217 cr.

Promoter Exits and Cash Burn

Three flags sit on this register, and they are not small.

First, promoter holding has dropped from 52.14% in June 2023 to 37.67% in March 2026, a fall of 14.5 percentage points in under three years. The public now holds 61.3%, spread across more than 2 lakh shareholders, with domestic institutions holding nothing at all.

Second, cash. FY26 cash from operations was negative Rs 10 cr against an operating profit of Rs 135 cr. Free cash flow was negative Rs 208 cr as capital work in progress jumped from Rs 32 cr to Rs 165 cr. The company raised Rs 188 cr through financing in FY26 to fund this. Profit on paper is not turning into cash in the bank.

Third, debtor days have stretched from 96 in FY20 to 118 in FY26. Management itself flagged slow collections from large clients and government contracts on the July 2026 earnings call. When a company books revenue faster than it collects it, the P&L flatters the truth.

#2 Zensar Technologies: The 0-Debt Cash-Rich RPG Group AI Adopter

Headquartered in Pune, Zensar Technologies is a midcap from the RPG group, with Harsh Goenka as chairman, a market cap of Rs 11,389 cr, a dividend yield of 3% and almost no debt.

Its AI push runs deeper than most mid-tier IT firms. As per the July 2026 earnings commentary, 85% of the workforce is now AI-certified. The company has built a suite it calls ZenseAI, which includes AgentMesh, a platform launched in June 2026 to help enterprises run fleets of AI agents, and ZenseAI.GW, a set of accelerators for insurance clients moving to the Guidewire cloud.

June quarter wins included an AI agent governance platform for a large American department store group and an AI-powered deduction audit platform for a US book distributor.

Banking and financial services now contribute 48.8% of revenue, and a $210 million mega deal signed in the March 2026 quarter began generating revenue from mid-February, with full ramp expected by the December quarter.

When Profit Growth Outpaces Core Sales

Let us look at the 5-year financials

Financial Year	FY21	FY22	FY23	FY24	FY25	FY26	5Y CAGR
Sales (Rs cr)	3,781	4,244	4,848	4,902	5,281	5,687	9%
EBITDA (Rs cr)	685	656	552	872	817	916	6%
Net Profit (Rs cr)	307	422	328	665	650	775	20%

EBITDA refers to operating profit before other income. Sales compounded at just 9%, yet profit compounded at 20%. The gap is margin repair plus other income. Operating margin fell to 11% in FY23, then recovered to 16% by FY26. On top of that, other income, largely earnings on the investment book, grew from a negative Rs 24 cr in FY21 to Rs 209 cr in FY26. Strip that out and the core business grew profits at a far humbler pace.

The June 2026 quarter delivered sales of Rs 1,508 cr, up 8.9% on the year, and net profit of Rs 184 cr, up just 1%. Margins took a hit from upfront transition costs on the mega deal, extra hiring and a rebuilt sales force. Management has guided that the September quarter should do better as the order book converts.

₹2,600 Cr Cash Pile: The Valuation Disconnect

The share price of Zensar Technologies was around Rs 415 in August 2021 and as of closing on 6^th August 2026 it was Rs 501.

Regarding valuation, the stock trades at a PE of 14x and the industry median is 23x. The 10-year median PE for the company is 20x while the industry median for the same period is 23x. The stock has corrected by over 40% from its all-time high of Rs 985.

For a near debt-free company with a 23% ROCE, a record order book and a fat cash cushion, that multiple sits well below where most quality midcap IT names have traded in recent years.

The financial position is the quiet strength here. Borrowings have shrunk from Rs 350 cr in FY21 to Rs 79 cr in FY26. The investment book has grown to Rs 1,921 cr. Net cash and equivalents stood at $317.5 million at the end of June 2026, which is over Rs 2,600 cr, or roughly 23% of the market cap. FY26 free cash flow was Rs 719 cr, and the company paid out 44% of profits as dividend.

Foreign Exits and Cannibalized Tech Budgets

Two risks deserve a mention. Foreign institutional holding has slid from 16.5% in March 2024 to 10.7% in June 2026. Domestic institutions have bought that supply, rising from 17.5% to 22%, but the foreign exit is a persistent overhang on the price.

The second risk carries some irony. Zensar’s technology vertical keeps shrinking because its own tech clients are cutting outsourcing budgets to fund their AI capex. Management has budgeted zero growth from its top TMT client for FY27. The AI wave that Zensar sells is the same wave eating one of its verticals. Fresh order intake of $149.2 million in the June quarter was also a multi-quarter low, something to watch over the next two results.

Markets Price Cash Flows, Not Press Releases

The two AI stocks tell a very different story. Kellton is a microcap priced below book, where the AI platforms are real but the cash flow is not keeping up, the promoters have sold a seventh of the company in three years, and no institution stands on the register. The 8x multiple is the market demanding proof that profits can become cash.

Zensar is a midcap with the opposite profile. Cash-rich, dividend-paying, nearly debt-free, with a mega deal ramping and 85% of its people trained on AI. Its 14x multiple reflects a slower-growth business in transition, not a balance sheet in doubt.

The shared lesson is uncomfortable for anyone chasing the AI theme through headlines. Doing genuine AI work has not protected either stock from a steep correction. The market is pricing collections, cash and conversion, not press releases. For the retail investor, the honest starting point is to know which of those two risk profiles they are actually buying, because the word AI appears in both stories and means something entirely different in each.

A good idea would be to add these stocks to a watchlist and track the next few quarters for cash flow and order conversion.

Disclaimer:

Note: We have relied on data from http://www.Screener.in and http://www.trendlyne.com throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.

The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.

Suhel Khan has been a passionate follower of the markets for over a decade. During this period, he was an integral part of a leading Equity Research organisation based in Mumbai as the Head of Sales & Marketing. Presently, he is spending most of his time dissecting the investments and strategies of the Super Investors of India.

Disclosure: The writer and his dependents do not hold the stocks discussed in this article. The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein.