Fractal Analytics is set to become India’s first artificial intelligence (AI) company to get listed on the bourses on February 16, pegged at a valuation of Rs 14,450 crores. This comes a day after the company reduced its initial public offering (IPO) size by 42 percent, and trimmed the top band of its share price by 18 percent.
The company’s listing date got a strategic push, getting aligned between Union Budget’s bullish announcements for the technology and AI services sector and India’s upcoming AI Impact Summit happening later in the month.
Fractal has fixed a price band of Rs 857 to Rs 900 per share. It has reduced its public issue size by 42 percent to Rs 2,834 crore in the RHP, compared to the Rs 4,900-crore IPO outlined in its draft red herring prospectus (DRHP) last year.
According to Srikanth Velamakanni, Co-founder and CEO, Fractal, the move came from the bankers and fund managers’ advise to leave “a lot of money on the table for making the IPO attractive for people to invest and see results.” The share price on the top end of the band was previously pegged at Rs 1,110 per share.
“At that price band, our investors said they would want to hold on, and stay on with Fractal for much longer. As they didn’t want to sell much, we had to reduce the overall IPO size,” Velamakanni told Moneycontrol in an interview on the sidelines of Fractal’s IPO roadshow in Mumbai on February 4.
He added, “We have been trying to strike that balance between how low we can price versus the investors simply not willing to sell. So, finally we found this equilibrium.”
At present, Apax Partners-managed Quinag Bidco, TPG Fett Holdings, GLM Family Trust, and Satya Kumari Remala and Rao Venkateswara Remala will be the selling shareholders in the offer-for-sale.
Meanwhile, Velamakanni and co-founder Pranay Agrawal will continue to hold on to their stakes post listing.
On profit visibility
Ashwath Bhat, Chief Financial Officer, Fractal said, over the last three years, the company’s profitability has expanded well, recording Rs 220 crores of net income last fiscal year. While the adjusted EBITDA grew to 17.4 percent, compared to close to 10 percent a couple of years ago.
“While our gross margin has stayed at around 45 to 46 percent, we are always focused on growth and our operating leverage takes care of the rest. Our drivers for future profitability will continue to be how we keep that gross margin high and improving and then SG&A by nature is either semi-variable or more or less fixed, so that is the operating method that will always be implemented,” he said.
The company is also steadily growing its research and development (R&D) spend as a part of the overall revenue. It grew from 5.2 percent of the revenue in the last fiscal year to 6.1 percent in the first half of this year, Bhat said.
“We would like to keep taking it in line with the revenue growth and also keeping the margins growing,” he added.
For its global competitors such as Palantir Technologies, R&D spend has been as high as 12-16 percent of the revenue.
Enterprise AI to drive demand
Even as competition between AI companies continue to intensify in the US -- also Fractal’s core market contributing around 64-65 percent of its overall revenue -- Velamakanni remained bullish that focusing on enterprise AI use cases will help the company stay differentiated.
“While so much exciting AI companies are coming, how many amazing enterprise AI companies have you heard of? Beyond Palantir, name one?” He asks.
“Anthropic has been doing an amazing job. At least in some verticals, they are beginning to build some enterprise capabilities. Their enterprise API is already being accessed by a lot of firms, which is very good. Even that, by the way, is just a starting point. It's not the end point,” he said.
He added, “There are very few AI companies that are building enterprise AI significantly. They're all interested in the exciting consumer AI. By focusing on enterprise AI, Fractal will continue to stay very relevant for the largest companies on the planet.”
Fractal’s AI offerings
Founded in 2000, the global enterprise AI company works with large multinational corporations helping them with decision-making through data-driven insights and end-to-end AI solutions.
Fractal’s offerings are organised into two segments.
Fractal.ai houses its AI services and products. Products are largely hosted on Cogentiq, its flagship agentic AI platform, enabling enterprises with pre-built agents, tools, connectors along with low-code features.
The second segment, Fractal Alpha, comprises independent AI businesses that target Fractal.ai’s core multinational clients as well as newer markets and geographies, each run by separate management teams.
In FY25, it reported a revenue of Rs 2,816 crore, up from Rs 2,241 crore in the previous year. Fractal Ai grew by 25.1% last year and 26% as Fractal group. Overall profit grew to Rs 220.6 crore from a loss of Rs 54.7 crore.
It serves 122 large multinational clients, including global names across banking, consumer goods, retail, technology, healthcare and insurance.
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