Today, the AI story is not well understood in the Indian market: Fractal CEO
Management is citing investors’ skepticism about AI’s sophistication and the need for market education as it prepares to launch at a lower valuation.
Srikanth Velamakanni, founder of Fractal Analytics, said: “Investors do not understand complexity. They do not like complexity. There is a huge need to educate the market about AI because there are not many AI stocks in the market.” Mint in an interview.
According to Velamakanni, category creators need to pass through this fire. “While there is a broader understanding that AI is great and AI is going to change everything and so on, most people don’t understand how AI works in the enterprise, how AI can significantly change organizational performance, and how companies can use AI to significantly increase their revenue, productivity, things like that,” he said.
“So I felt like there was a big gap, and we tried to explain to investors that the AI excitement in the world needs to be translated into corporate performance, and you need a fractal or Palantir type of company to really make that happen,” he added.
On Wednesday, the company announced the price range for the IPO as follows: ₹857-900 per share, which means an indicative valuation ₹15,473 crore or $1.86 billion Mintcalculations.
This valuation marks a 24% decline from its previous fundraising in July 2025, when the company was valued at $2.44 billion. At the time, Fractal had raised $170 million from investors including Trust Investment Advisors, White Oak Capital Management, Gaja Capital and Neo Asset Management.
Mint It reported on Feb. 3 that Fractal had reduced the size of its public issue after investors, including private equity firms Apax Partners and TPG Capital, decided to sell a smaller stake due to lower-than-expected valuation in uncertain market conditions.
“I expect many more companies to be founded in India that are at the forefront of AI, using AI and using AI to transform the world in their own niche ways. It’s good that Fractal is a company that is sort of creating an easier path for the rest,” Velmanakanni added.
Appealing to a wide global customer pool, Fractal relies on core growth tools. An industry report by Everest Business Advisory India said that in 2024-25, businesses will spend an estimated 40.3% of their total global digital services spend on third-party services, worth around $449 billion.
“Although recent macroeconomic conditions have pushed businesses to develop more in-house capabilities, the share of third-party spend is expected to continue to grow at an estimated compound annual growth rate of 9.4% through 2029-30,” the report said.
Tempered expectations
AI plans to upgrade unicorn now ₹2,834 crore, 42% less than planned ₹4,900 crore was shown in the red herring prospectus submitted on February 2.
Public offering now has a new export dimension ₹1,024 crore, 20% discount on draft papers. Sales quote component reduced by a maximum of half ₹1,810 crore. Thereupon, Apax reduced its share sales by 40%. ₹880 crore. Meanwhile, TPG reduced OFS size by 78% ₹450 crore. The company also did not raise any pre-IPO funds, despite carrying a heavy load. ₹256 crore round.
Despite the decline in valuation and IPO disruption, Fractal’s use of proceeds has seemingly remained unchanged. As stated in the draft filing, the company is still ₹265 crore for investments and debt repayment in its subsidiary Fractal USA. From the remaining amount, ₹355 crore will be used for research, development and sales of the Fractal Alpha product. In addition, ₹57 crore will be used to purchase laptops and ₹121 crore to establish new offices in India.
This means that the remaining unallocated amount, originally intended to finance inorganic growth and general corporate purposes, ₹475 crore ₹225 crore.
“We are identifying and looking to strengthen companies that are using AI in a specific vertical sense or doing great AI, R&D, and building something that we think can directly complement and augment what we do on a mediated, cogenetic platform,” Velamakanni said of the acquisitions they are exploring.
The listing would be the latest in several motherboard IPOs to hit the country’s sluggish primary market this year. Only three companies launched mainboard IPOs in January: Shadowfax Technologies, Amagi Media Labs and Bharat Coking Coal. This was down from 10 listings in December as weak market conditions worsened due to trade and geopolitical uncertainties.
Fractal provides AI solutions such as customer relationship management analytics, cognitive automation, quantum computing, and machine learning operations services. Its customers range from financial services to healthcare, insurance and retail markets worldwide, with 65% of its revenue coming from the US market.
Consolidated revenue from operations increased by 20% annually ₹1,559 crore in the six-month period ending September 2025.
The firm’s earnings before interest, taxes, depreciation and amortization in February were: ₹200 crore, up 50%. Its margin relative to the top line increased to 12.8% from 10.3% a year ago.
Profit reached ₹71 crore, down 3% compared to the same period last year. ₹73 crore, this was mainly due to the previous period having higher deferred tax credit component. ₹23 crore compared to current period ₹0.5 crore.
Velamakanni said the company currently allocates about 6.1% of its revenues to R&D expenses, and this figure is likely to increase further. “We will invest more in R&D to future-proof our company against technological disruptions,” he added.
