Can the excitement around an artificial intelligence IPO survive the valuation risks? That is the key question investors are grappling with as Fractal Analytics initial public offering hits the market.
The IPO of Fractal Analytics opened for subscription today, February 9, and will close on Wednesday, February 11. While the issue attracted strong attention ahead of its launch, the grey market premium (GMP) has eased sharply from peak levels and is now hovering around 2%.
Fractal Analytics IPO: GMP trend
The current grey market trends suggest muted listing gains. The unlisted shares of Fractal Analytics are trading around Rs 913. This translates into a premium of less than 2% over the upper end of the price band – Rs 900.
However, it is important to understand that this is not an official indicator, and the GMP fluctuates based on market sentiment. The actual listing price can be very different from the GMP.
Fractal Analytics IPO details, issue objectives
Fractal Analytics has fixed its price band at Rs 857-900 per share and is looking to raise Rs 2,833.90 crore through the public issue.
This includes a fresh issue of shares worth Rs 1,023.50 crore and an offer for sale (OFS) of Rs 1,810.40 crore by existing shareholders.
Under the OFS, GLM Family Trust, Quinag Bidco, TPG Fett Holdings, Satya Kumari Remala and Rao Venkateswara Remala will be reducing their stake in the company.
The fresh issue proceeds, meanwhile, are planned to be used across multiple areas such as debt repayment at its US subsidiary, investment in research and development, spending on sales and marketing under Fractal Alpha, setting up new offices in India, funding acquisitions and meeting general corporate needs.
Each IPO lot consists of 16 shares, and investors can apply in multiples of this lot size.
Fractal Analytics IPO: Anchor book
Ahead of the public issue, Fractal Analytics raised Rs 1,248.26 crore from 52 anchor investors.
The anchor list included several well-known domestic and global institutions such as SBI Mutual Fund, ICICI Prudential Mutual Fund, UTI Mutual Fund, Motilal Oswal Mutual Fund, LIC, HDFC Life Insurance Company, SBI Life Insurance Company, Morgan Stanley Investment Funds, Goldman Sachs Bank Europe and Societe Generale.
Fractal Analytics IPO: Brokerages divided
Here’s what brokerages say on this IPO –
Deven Choksey Research, in its IPO note, said, “The company operates in a dynamic environment which highly prone to technological disruptions, although we find the management dynamic which toggle the environment and sustainable manage the growth and operational efficiencies over the next 3-5 years. We expect the company to significantly leverage its revenue per employee as the business scales with newer applications and clientele. Based on our prima facie back of the envelope calculations we assess the Rev/EBITDA/PAT at 18%/46%/62% respectively over next two years which will translate to forward FY28E PE of 22x. We believe this leaves a significant leg room for growth and one can think for looking at this company from a long-term perspective actively tracking the technological advancements pertaining to the AI systems.”
Anand Rathi, however, flagged valuation risks in its report, stating, “On the valuation front, based on annualized FY26 earnings, the company is seeking a P/E of 79x times, and a post-issue market capitalization of approximately Rs 1,54,736 million, making the issue appears to be richly priced. Additionally, insourcing by clients especially with the advent of AI tools could lead to loss of clients and impact the company’s business model.” The brokerage added that despite these concerns, it has assigned a Subscribe-long Term rating, citing Fractal’s client relationships and sector presence.
Geojit Investments also highlighted the expensive valuation, noting, “At the upper price band of Rs 900, Fractal is valued at a P/E of 70x for FY25 and a P/E of 109x (annualised) for FY26E, reflecting an expensive valuation.” At the same time, it pointed to Fractal’s global client base and sector exposure, recommending the issue for high-risk investors with a long-term horizon.
Fractal Analytics IPO: Key dates to track
The basis of allotment for the IPO is expected to be finalised on Thursday, February 12. Fractal Analytics shares are scheduled to list on the stock exchanges on February 16.
About the company
Founded in 2000 by Srikanth Velamakanni and Pranay Agrawal, Fractal Analytics operates as a global enterprise artificial intelligence and analytics company. It works with large organisations across industries, helping them use data and AI to make better business decisions.