Fractal Analytics Founder Emphasizes Need for AI Market Education Amid IPO Valuation Challenges
Mumbai: As Fractal Analytics prepares for its market debut at a reduced valuation, founder Srikanth Velamakanni has highlighted a significant gap in investor understanding of artificial intelligence technologies. The AI solutions provider, which recently announced its price band for the initial public offering, faces a 24% markdown from its previous fundraising valuation.
Investor Scepticism and Market Complexity
According to Velamakanni, public market investors have yet to fully comprehend the AI sector's potential and complexity. "Investors don't understand complexity. They don't like complexity. And there's a huge need to just educate the market on AI because there are not a lot of AI stocks out there," the Fractal Analytics founder stated in an interview.
He elaborated that while there's broad recognition that AI will transform industries, most people don't grasp how AI functions within enterprise environments or how it can dramatically improve company performance. "Most people don't understand how AI works in the enterprise, and how AI can change enterprise performance significantly, and how companies can use AI to dramatically improve their revenues and productivity," Velamakanni explained.
Revised IPO Plans and Valuation Details
The company announced its price band at ₹857-900 per share, implying an indicative valuation of ₹15,473 crore or $1.86 billion. This represents a substantial reduction from the company's $2.44 billion valuation during its July 2025 fundraising round. Fractal now plans to raise ₹2,834 crore through its IPO, which is 42% less than the originally planned ₹4,900 crore.
The revised IPO structure includes:
- A fresh issue size of up to ₹1,024 crore (20% reduction from draft papers)
- An offer-for-sale component halved to a maximum of ₹1,810 crore
- Apax Partners cutting its share sale by 40% to ₹880 crore
- TPG slashing its OFS size by 78% to ₹450 crore
Business Fundamentals and Growth Strategy
Despite the valuation adjustment, Fractal maintains strong business fundamentals. The company's consolidated revenue from operations rose 20% year-on-year to ₹1,559 crore for the six-month period ended September 2025. Their earnings before interest, taxes, depreciation, and amortization stood at ₹200 crore, representing a 50% increase.
Velamakanni emphasized the company's commitment to research and development, noting they currently allocate 6.1% of revenues toward R&D spending. "To make our company future-proof from tech disruptions, we will invest more in R&D," he affirmed.
The company plans to utilize IPO proceeds for several strategic initiatives:
- ₹265 crore for investments in subsidiary Fractal USA and debt repayment
- ₹355 crore for research and development and sales of Fractal Alpha product
- ₹57 crore for purchasing laptops
- ₹121 crore for establishing new offices in India
Market Context and Industry Outlook
Fractal's listing comes during a subdued period for India's primary market, with only three companies launching mainboard IPOs in January compared to ten in December. The company provides AI solutions including customer relationship management analytics, cognitive automation, quantum computing, and machine learning operation services to global clients across financial services, health, insurance, and retail markets.
Velamakanni expressed optimism about India's AI future, stating, "I expect that many more companies will get created in India, which are AI-first, which are taking AI and using AI to transform the world in their own niche way. And it's good if Fractal is a company that sort of establishes an easier path for the rest."
The company continues to scout for strategic acquisitions, focusing on firms using AI in specific verticals or conducting advanced AI research that complements Fractal's existing platform capabilities.
