Kotak Institutional Equities has issued a BUY recommendation for Indegene, a leading IT services firm specializing in the healthcare and life sciences sectors, with a current market price (CMP) of Rs 583 and a revised fair value (FV) target of Rs 700. The report highlights robust growth prospects, minimal demand disruption from regulatory or pricing uncertainties, and a strong M&A pipeline. Indegene is prioritizing revenue recovery over margin expansion in the near term, while its penetration into upstream marketing and adoption of generative AI are expected to drive long-term value. The stock is seen as well-positioned for double-digit growth in FY2026, with favorable industry dynamics and a constructive outlook.

Kotak Institutional Equities: Indegene—BUY, Target Rs 700

Kotak Institutional Equities, a heavyweight in Indian equity research, has placed a BUY call on Indegene, citing a compelling risk-reward profile. The CMP stands at Rs 583, with a revised 12-month target of Rs 700, reflecting a 20% upside. This upgrade is based on a detailed analysis of Indegene’s operational resilience, growth levers, and sectoral tailwinds.

Key Takeaways from Management Interactions

Uncertainty Over Tariffs and Drug Pricing—No Major Impact

Despite ongoing concerns about tariffs and potential changes to drug pricing regimes, Indegene’s demand trajectory remains largely intact. Pharma companies are expected to navigate regulatory headwinds without drastic operational changes. Importantly, staffing reductions at the FDA have not delayed late-stage drug approvals, and Indegene’s limited exposure to biotech further insulates it from sector-specific risks.

Growth Recovery in FY2026—On Track

Indegene anticipates a robust recovery in revenue growth for FY2026, with no significant client-specific headwinds on the horizon. The extent of growth will hinge on the spending decisions of a handful of key clients, but the overall outlook is positive. Enterprise commercial solutions are expected to drive this recovery, as previous client-specific issues have been resolved.

Growth Over Margins—A Strategic Priority

The company is deliberately prioritizing growth recovery over margin expansion in the near term. Investments in sales, consulting, and technology infrastructure are being ramped up to bolster growth momentum. Simultaneously, Indegene is focusing on operational efficiency through automation and resource optimization.

Upstream Marketing Penetration—A Gradual but Promising Journey

Indegene is making gradual inroads into upstream marketing areas, with encouraging feedback from pilot programs. Some pilots are already transitioning to production, though full-scale implementation will require high-level executive approvals and time. The company expects significant progress over the next several quarters.

Strong M&A Pipeline—Targeting Strategic Acquisitions

Indegene’s M&A strategy is focused on entities with revenues between US$20 million and US$50 million. Key target areas include marketing agencies, business technology, regulatory affairs, and clinical solutions. This pipeline is expected to provide additional growth catalysts.

Company Data and Valuation Summary

Stock Levels and Performance

Forecast and Valuation Metrics

Operational and Financial Highlights

Revenue and Margin Trends

Indegene has demonstrated steady revenue growth, with quarterly revenues rising from US$77.1 million in 4QFY23 to US$87.4 million in 4QFY25. EBIT margins have fluctuated but remain robust, averaging around 17% over the past two years. The company’s focus on operational efficiency and automation is expected to sustain these margins.

Service and Geographic Mix

Enterprise commercial solutions dominate the service offering, accounting for over 55% of revenues. North America is the primary market, contributing about 70% of total revenues, followed by Europe. India and the rest of the world make up a smaller share.

Client Concentration and Employee Metrics

Client concentration has improved, with the top 10 clients now accounting for 56.4% of revenues, down from 69.2% two years ago. The active client base has expanded, and employee metrics reflect a stable workforce with high offshore utilization.

Growth Drivers and Industry Outlook

Generative AI—A Game Changer

Indegene is leveraging generative AI in both medical and marketing domains, running pilots with select clients. The adoption of AI is expected to enhance operational efficiency and drive market share gains.

Digital Marketing—A Structural Shift

The shift from physical sales reps to digital marketing is accelerating, with pharma companies increasingly targeting physicians through digital channels. Indegene’s data-driven approach positions it well to capitalize on this trend.

Mid-Size Pharma—A Growth Frontier

Mid-size pharma companies represent a significant growth opportunity, with Indegene actively expanding its regional engagements and cross-selling services.

Unbundling of Services—A Competitive Edge

As pharma companies unbundle services from agencies and CROs, Indegene is well-placed to capture new business, particularly in areas where traditional providers have struggled, such as digital patient onboarding.

Investment Rationale and Target Levels

Constructive Stance and BUY Rating

Kotak Institutional Equities retains a constructive stance on Indegene, projecting double-digit revenue growth in FY2026, supported by healthy deal wins, a robust renewal cycle, and a favorable industry outlook. The firm values the stock at 28x June 2027E earnings, resulting in a revised fair value of Rs 700 (up from Rs 660).

Target for Investors

For investors seeking exposure to a high-growth, technology-driven healthcare IT services player, Indegene offers an attractive entry point at current levels, with a clear path to Rs 700 over the next 12 months. The stock’s leadership in the underpenetrated S&M outsourcing market, strong client relationships, and technology prowess underpin its long-term growth potential.

Long Term Views: Why Indegene Stands Out

Indegene’s strategic focus on growth, its embrace of cutting-edge technologies like generative AI, and its ability to navigate regulatory and industry challenges set it apart in a competitive landscape. With a strong M&A pipeline and a clear vision for the future, Indegene is well-positioned to deliver sustained value for investors. Kotak Institutional Equities’ BUY recommendation and Rs 700 target underscore the compelling investment case for this dynamic company.