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Fractal Analytics Gets Buy Rating From Kotak Securities; AI Adoption Could Unlock 22 Percent Upside
Fractal Analytics could be moving from being an AI beneficiary to becoming an AI partner for large enterprises, a shift that domestic brokerage Kotak Securities believes can support meaningful growth over the next few years.
That said, the brokerage has initiated coverage on the stock with a ‘Buy’ rating and a fair value of Rs 1,000, implying about 22% upside from the current price of Rs 818.
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Analysts Satishkumar S, Kawaljeet Saluja and Vamshi Krishna of Kotak Securities said Fractal’s positioning as a pure-play provider of data, analytics and AI services gives it a strong starting point as companies increasingly embed AI into core business functions.
The AI Opportunity
Analysts expect Fractal’s US-dollar revenue to clock a 16.6% CAGR over FY26-29, with growth accelerating in FY28 and FY29 as enterprise AI adoption scales. The brokerage also expects operating leverage and lower absolute ESOP expenses to drive around 300 basis points of EBITDA margin expansion.
That, in turn, could support a 36% CAGR in adjusted PAT over FY26-29, making profitability expansion an important part of the investment case.
“The global DAAI services market is expected to grow at a healthy 16.7% CAGR through FY30,” the analysts said, adding that Fractal’s technology capabilities, client base and talent retention position it to capture a share of that growth.
From Service Provider To Strategic Partner
The bigger opportunity may lie in how Fractal’s relationship with customers evolves.
Kotak Securities expects AI, including advanced AI, agents and agentic AI, to become increasingly central to enterprise operations. As that happens, Fractal could move beyond its traditional data, analytics and AI mandate to participate across a wider range of enterprise functions.
This could open opportunities in areas such as software engineering and customer-experience BPO, allowing the company to increase its wallet share with existing customers.
Fractal already has 112 must-win clients, while its ability to scale six accounts to annual revenue of $20 million highlights its account-mining and cross-selling potential, Kotak Securities said.
Risks To The AI Thesis
The brokerage, however, flagged client, geographic and vertical concentration as key risks.
Rapid advances in AI could also reduce demand for specialised services, while intensifying competition and deflationary pressure in the base business could weigh on growth and margins.
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