Fractal Analytics IPO opens today: Brokerages mixed, valuation a concern

The ₹2,834 crore initial public offering (IPO) of artificial intelligence (AI) solutions provider Fractal Analytics will open for subscription on Monday, February 8, and conclude on February 11.

Ahead of the issue launch, the company raised ₹1,248.26 crore from anchor investors, including Morgan Stanley Investment Funds, Goldman Sachs Bank Europe, Societe Generale (ODI), SBI Mutual Fund, and ICICI Prudential Mutual Fund, among others.

Fractal Analytics IPO: Should you bid?

Angel One: Neutral

At the upper price band of ₹900, Fractal Analytics is valued at a rich post-issue P/E multiple of 67.4x, suggesting aggressive pricing led by strong growth expectations in enterprise AI, a premium Fortune 500 client base, and favourable long-term industry tailwinds.

However, given the elevated valuation, evolving profitability profile, and execution risks in a rapidly changing AI landscape, the brokerage has adopted a ‘Neutral’ stance on the issue.

Angel One added that it would closely track the company’s performance over the coming quarters before taking a clearer investment view.

SBI Securities: Neutral

Citing elevated valuations, SBI Securities has also assigned a ‘Neutral’ rating to the issue and said it would prefer to track the company’s post-listing performance for a few quarters.

According to the brokerage, Fractal Analytics continues to report a relatively high attrition rate. It also said risks such as potential insourcing by clients, especially with the advent of AI tools, which could lead to client losses and impact the company’s business model.

Swastika Investmart: Subscribe

Swastika Investmart said that Fractal Analytics is India’s first pure-play AI company to list, positioned as a Decision Intelligence player that combines AI services with incubated SaaS products under Fractal Alpha.

The brokerage pointed to a sharp turnaround in financial performance, with the company moving from a ₹55 crore loss in FY24 to a ₹221 crore profit in FY25, driven by 26% revenue growth.

While valuations appear expensive at 79x post-FY25 P/E at the upper price band, Swastika said this reflects a scarcity premium for a listed AI platform.

Fractal Analytics IPO: Price band

The price band for the issue has been fixed at ₹857 to ₹900 per share. The face value of each share is ₹1. Eligible employees will receive a discount of ₹85 per share when applying to the IPO.

At the upper end of the price band, Fractal Analytics is valued at ₹15,473.6 crore.

Fractal Analytics IPO: Structure

The IPO comprises a fresh issue worth ₹1,023.5 crore and an Offer For Sale (OFS) of ₹1,810.4 crore.

Shares in the OFS are being sold by Quinag Bidco Ltd, TPG Fett Holdings Pte. Ltd, Satya Kumari Remala Rao, Venkateswara Remala, and GLM Family Trust.

Of the total issue, 10% is reserved for retail investors, who will need to invest a minimum of ₹14,400 for one lot of 16 shares.

Meanwhile, 75% of the issue is reserved for Qualified Institutional Buyers (QIBs).

Promoter shareholding, which stood at 18.18% pre-IPO, is expected to decline to 16.98% post-issue.

Fractal Analytics IPO: Objective

The company plans to use a portion of the IPO proceeds to invest in its subsidiary for the repayment of certain borrowings.

Funds will also be allocated towards purchase of laptops, new office premises, R&D, sales and marketing, and inorganic acquisitions, details of which have not been specified.

Backed by marquee investors such as TPG, Apax, and Gaja, Fractal Analytics is a leading pure-play data and AI company with domain expertise across consumer packaged goods and retail; technology, media and telecom; healthcare and life sciences; and banking, financial services and insurance (BFSI).

Fractal Analytics targets 25-30% revenue growth on rising enterprise AI demand

Speaking to CNBC-TV18, Srikanth Velamakanni, Co-founder and Group CEO of Fractal Analytics, said he expects faster revenue growth over the next two to three years as enterprise AI adoption accelerates.

He added that the company aims to maintain 25-30% revenue growth, subject to sustained market opportunities.

Ashwath Bhat, CFO of Fractal Analytics, said margins are expected to improve as the company’s enterprise AI platform, Cogentic, contributes a larger share of revenue.

Velamakanni said that gross margins currently stand at around 46% and could move above 50% over time.

Kotak Capital, Morgan Stanley India, Axis Capital and Goldman Sachs are the Book Running Lead Managers for the issue, while MUFG Intime India Pvt. Ltd. is the registrar.

Allotment of shares is expected on Thursday, February 12, with the stock scheduled to list on the exchanges on February 16.