AI STORM HITS DALAL STREET: FRACTAL ANALYTICS WINS SEBI APPROVAL

By N.Niharika

Introduction

India is set to witness its first-ever IPO from an AI-focused company, as SEBI has officially approved Fractal Analytics’ draft papers. This green light allows the Mumbai-based AI powerhouse to move one step closer to listing on the stock market. Fractal plans to raise around ₹49,000 crore (about $563 million) a major milestone for India’s rapidly growing AI and data-tech ecosystem.

Fractal’s IPO will include both a fresh issue and a large sale by existing investors, with the new funds going toward repaying U.S. debt, opening new offices in India, and boosting generative AI research. CEO Srikanth Velamakanni says R&D spending will stay high to keep the company ahead in the global AI race. About three-quarters of the IPO will let early investors like TPG Fett and Apax Partners partially exit. Fractal already works with top global giants such as Microsoft, Apple, Google, Amazon, Meta, Nvidia, and Tesla, showing its strong credibility. The founders, who together hold around 20%, aren’t selling their shares, signaling strong confidence in the company’s future. To manage the offering, Fractal has hired Morgan Stanley India, Goldman Sachs India, Kotak Mahindra Capital, and Axis Capital. Overall, the IPO reflects both major investor interest and Fractal’s rising position in the global AI ecosystem.

Financial status of Fractal Analytics

Fractal Analytics shows strong growth in its assets over the years, reflecting solid business expansion. Revenue has increased steadily, indicating consistent demand for its analytics services. Profits, though moderate, show a positive upward trend and improving operational efficiency. Reserves and surplus have grown, strengthening the company’s financial cushion. Borrowings remain relatively low, highlighting a conservative debt strategy. Total liabilities are well managed and aligned with business growth. The company maintains a healthy balance between growth and financial discipline. Rising revenue alongside controlled costs reflects sound strategic planning. The financial structure suggests stability and long-term sustainability. Overall performance highlights Fractal Analytics as a financially resilient organization.

Significance of Fractal’s IPO

Fractal Analytics is gearing up for a major IPO with a valuation above $3.5 billion, backed by strong financial performance and rapid growth in the AI and analytics space. The company posted a sharp 25.9% jump in revenue in FY25 and turned profitable with a solid ₹220 crore PAT after a loss last year. With healthy margins and rising assets, Fractal stands out against slower-growing IT giants like TCS, Infosys, and Wipro. Its focused bet on generative AI gives it a strong edge in the deep tech segment. This IPO also sends a positive signal for India’s growing tech startup ecosystem, especially after the strong market performance of Latent View Analytics.

Fractal’s IPO Feels Different From The other Market Debut

Fractal Analytics has staged a strong comeback, moving from a loss in FY24 to a ₹220.6 crore profit in FY25, backed by rising revenue and stronger margins. This signals a business that’s not just recovering but gaining real momentum. What makes Fractal unique is that it’s a true AI-native company, with AI and analytics at the heart of everything it builds. Its IPO brings a new kind of tech player to Indian markets—one aligned with the global shift toward scalable, product-led AI. Entering the market with big global clients, Fractal arrives at a time when investors want exposure to real AI innovators, not traditional service-led firms.

Fractal’s IPO stands out because it marks the rise of a new kind of tech company in India—one built around scalable, product-led AI. With major global tech firms already as clients, it enters the market at a time when investors are actively seeking genuine AI businesses. This naturally creates both excitement and caution. Analysts note that while Fractal is profitable, its valuation may feel high, which is common for emerging tech players. Even so, its financial momentum and status as India’s first true AI-focused IPO make it one of the year’s most anticipated listings.

Where Fractal Analytics Will Direct Its IPO Proceeds

Fractal Analytics will use most of its IPO funds to strengthen its business and fuel future growth. A major portion will go toward repaying a loan taken by its U.S. subsidiary. It will also invest in new India offices and essential employee equipment. Around ₹355 crore will be directed to Fractal Alpha, the company’s key engine for building and scaling its AI products, research, and sales. The remaining amount will support acquisitions, strategic projects, and general needs, while money from the Offer for Sale will go only to existing shareholders selling their stakes.

Capitalization Table

Shareholder	Percentage of Equity Share Capital (%)
TPG Fett Holdings Pte. Ltd.	27.27%
GLM Family Trust	19.33%
Quinag Bidco Ltd	10.93%
Pranay Agrawal	5.93%
Srikanth Velamakanni	5.40%
Chetana Kumar	4.65%
Narendra Kumar Agrawal	4.35%
Relativity Resilience Fund I	1.27%
Gaja Capital India Fund 2020 LLP	1.13%
Dovetail India Fund – Class 6 Shares	1.12%

Key Risk Factors for Fractal Analytics in the capital market

1. Dependence on Key Customers Fractal earns a significant portion of its revenue from a small number of clients about 27% from its top five customers and 38% from the top ten. Losing any of these clients, or seeing them cut back on services, could hurt the company’s earnings. Relying heavily on a few customers makes Fractal vulnerable to shifts in their budgets, priorities, or policies.

2. Contract and Renewal Risks Many of Fractal’s contracts allow clients to terminate without a specific reason and require the company to compete for renewals. This makes revenue less predictable and exposes the business to competition whenever contracts come up for renewal.

3. Heavy Exposure to the U.S. Market A large chunk over 69% of revenue comes from U.S. clients. Economic, political, or regulatory changes in the U.S., including visa restrictions, could disrupt operations or Revenue.

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4. Currency Fluctuation Since much of Fractal’s revenue is in foreign currencies like the U.S. dollar, changes in exchange rates can affect profits. For example, a 1% shift in FY25 would have changed profit by around ₹13.85 crore. While the company uses hedging strategies, they may not fully cover all risks.

5. Intense Competition Fractal operates in a highly competitive AI and analytics space. Global consulting firms, specialized analytics companies, and tech giants can outspend or outcompete it, potentially reducing its market share and profits.

6. Reliance on Skilled Talent The company’s growth depends on retaining senior management, including its co-founders, and attracting skilled professionals. Losing key personnel or struggling to hire talent could affect operations and strategy execution. 7. Data Security and Compliance Fractal handle sensitive client data across multiple countries. Any data breach or failure to comply with privacy laws could lead to legal penalties, lost clients, and reputational damage. Meeting diverse and evolving regulations also adds operational costs. 8. Acquisition and Integration Risks Fractal grows partly through acquisitions, but integrating new businesses can be challenging. If acquisitions don’t perform as expected or distract management from core operations, it could reduce profitability. 9. Ethical and Responsible AI Concerns AI systems can sometimes produce biased or unintended results. Poor outcomes could hurt Fractal’s reputation, upset clients, or trigger regulatory scrutiny. Emerging AI regulations may also increase compliance costs. 10. Technology Infrastructure Dependence Fractal relies on IT systems and cloud platforms to deliver its services. Any outages, cyberattacks, or poor disaster recovery planning could disrupt projects and affect client relationships. Other Risks The company also faces risks from supplier dependency, potential tax changes, financial market volatility, protecting intellectual property, competition for acquisitions, and possible shareholder dilution from future equity issues. Overview Fractal Analytics is going public, making history as India’s first AI IPO, with strong profits, global clients, and big R&D plans. While the company’s growth story is exciting, investors should keep in mind risks like reliance on key customers, U.S. exposure, competition, and talent retention. Success will depend on execution and market response.