Fractal Analytics bets heavily on R&D in AI race ahead of IPO

Fractal plans to raise Rs 4,900 crore ($554 million) in its IPO, including a fresh issue of up to Rs 1,279 crore and a Rs 3,621 crore share sale by investors.

Artificial intelligence firm Fractal Analytics plans to maintain high research and development spending ahead of its market debut for which a date has not yet been set, a top executive said.

Fractal, which specialises in AI-driven decision-making for large businesses, will continue to invest 'significantly', and possibly increase its research outlay to stay competitive, chief executive officer Srikanth Velamakanni told Reuters.

In 2025, Fractal spent Rs 144 crore ($16.6 million) on R&D, with an average 6% spend on R&D over the past three years, the company's red herring prospectus showed. Fractal is waiting to receive approval from India's securities regulator to move forward with its initial public offering.

"No company can take its AI credibility for granted," said Velamakanni.

"If you're not investing seriously in AI R&D and building at the cutting edge, what is your right to survive or even exist?"

The company's listing push comes as global investment pours into building new infrastructure to meet a projected boom in demand for AI services.

India is a critical growth market where nearly a billion users access the internet. Google recently committed to a $15 billion investment over five years to create an AI data center in the South Indian state of Andhra Pradesh. Microsoft and Amazon have also poured billions into building data centers in India.

Fractal, which operates from New York and Mumbai, earns more than 65% of its revenue from US clients including the likes of Microsoft, Apple, Nvidia, Alphabet, Amazon, Meta and Tesla.

Velamakanni, however, does not view reliance on big technology firms as a risk, adding that the company is expanding global revenues as fast as possible across the world.

Nearly 10% of Fractal’s revenue comes from a single company that's part of the Magnificent 7.

"It's been a nine-ten year relationship and we see opportunities to expand”, Velamakanni said without naming the client.

Fractal Analytics has raised over $800 million so far in funding from investors like Quinag Bidco Ltd, Apax Partners and TPG Fett Holdings, the CEO said. With its listing, Fractal is set to become India's first listed AI-led company and Velamakanni hopes its debut will open the door for other domestic AI firms to tap capital more easily.

Indian AI firms such as Sarvam and Krutrim have seen fundraising from marquee investors such as Peak XV Partners and Matrix Partners India.

Fractal plans to raise Rs 4,900 crore ($554 million) in its IPO, including a fresh issue of up to Rs 1,279 crore and a Rs 3,621 crore share sale by investors.