Day‑two bidding numbers look flat, but what does it really mean?
So, the second day of the Fractal Analytics Ltd IPO has just closed and, honestly, the numbers are not what most market‑watchers expected. By 5:50 pm on the second day, the issue received bids for about 36.4 lakh shares, while the total issue size was a whopping 185.79 lakh shares. That works out to a 0.20x overall subscription – in other words, for every share on offer, the market only wanted about a fifth of it. The retail quota was a bit better at 0.60x, but the non‑institutional investors (NII) were really shy, hitting only 0.27x. In plain Indian‑English, the demand was pretty muted.
Why does this matter? In most IPOs, a subscription of at least 2‑3x is considered healthy, showing strong appetite. Here, the numbers suggest investors are either waiting for more clarity on the company’s growth story, or they simply feel the pricing is a bit high given the current market mood.
Grey‑market premium – a tiny edge over the top price band
Now, let’s talk about the grey‑market premium (GMP). According to the market chatter, the unlisted shares of Fractal Analytics Ltd were trading at Rs 908 each in the grey market. That’s just a 0.89 per cent premium over the upper price band of Rs 900. Compare that with the first day, when the GMP was about 1.44 per cent, and you can see the enthusiasm has cooled a little.
GMP is basically a barometer of how much investors are willing to pay above the issue price before the shares even get listed. A small premium like this tells us that the market is not overly bullish – they are perhaps waiting to see if the company can deliver on its AI promises before they decide to pay a higher price.
For a company that is positioning itself as a pure‑play AI and analytics player, you would think the hype would push the premium higher. But remember, the Indian IPO landscape has been a bit jittery lately, and investors are being extra cautious, especially when the valuation multiples look steep.
What the brokerages are saying – a mix of optimism and caution
Several broker houses have weighed in, and their notes are worth a read if you’re trying to decide whether to apply.
ICICI Direct’s take
ICICI Direct pointed out that Fractal Analytics is building a fairly complete suite of AI solutions – from its enterprise agentic AI platform called Cogentiq to product‑level offerings like Asper.ai, Kalaido.ai, Vaidya.ai and Qure.ai. They did a quick benchmark against peers on things like R&D spend, capex intensity, patent filings and AI‑related revenue. The verdict? Fractal sits about on par with its Indian IT services peers, but lags a bit when compared with global AI giants and pure‑play platform companies.
ICICI also noted that metrics such as revenue per employee and cost per employee are similar to those of LatentView Analytics, another Indian data‑analytics firm. In other words, while Fractal’s product list looks impressive, the underlying economics are still comparable to many domestic players.
BP Wealth’s view – a ‘subscribe’ rating
BP Wealth gave the IPO a “subscribe” rating, saying Fractal Analytics Ltd, founded back in 2000, is now a globally recognised enterprise AI partner. They highlighted two segments:
- Fractal.ai – the AI services and product side, mainly hosted on the Cogentiq platform; and
- Fractal Alpha – the company’s AI‑focused businesses.
According to BP, the company is well‑placed to ride the structural tailwinds in the global data, analytics and AI (DAAI) market, which is expanding fast as enterprises embed AI into core processes. They mentioned the forward‑looking P/E of about 110× based on FY26 earnings – a lofty multiple, but justified, they argue, by the company’s growth prospects and improving profitability.
Ventura’s perspective – still a ‘subscribe’ but watch the risks
Ventura also gave a “subscribe” rating, focusing on the fact that Fractal’s growth is powered by rising enterprise adoption of AI‑driven decision intelligence and the rollout of generative AI solutions. However, they cautioned about execution risks, fast‑changing technology cycles and intense competition in the global AI‑analytics space.
Overall, the broker houses seem to aGree that Fractal has a solid product platform and a diversified client base, but the valuation is high and investors should keep an eye on how quickly the company can turn its AI ambitions into measurable earnings.
Financial snapshot – profitability finally turning positive
One of the most encouraging signals comes from the numbers. In FY25, Fractal’s EBITDA jumped to Rs 398 crore, which is a 14.4 per cent margin – a huge leap from the Rs 97.2 crore and 4.4 per cent margin it reported in FY24. Adjusted EBITDA was even higher at Rs 482.1 crore, giving an adjusted margin of 17.4 per cent.
Profit after tax (PAT) also flipped to the positive side – Rs 220.6 crore in FY25, compared with a loss of Rs 54.7 crore the previous year. That translates to an 8.0 per cent PAT margin, and an adjusted PAT margin of 12.6 per cent, thanks to a Rs 347.8 crore adjusted PAT figure.
These improvements suggest the company’s focus on higher‑margin AI products is finally paying off. Still, remember that the profit figures are still relatively modest when you compare them with the lofty P/E multiple the market is assigning.
Anchor investors – strong backing before the public issue opened
Even before the bidding opened for the public, Fractal managed to lock in about Rs 1,248 crore from anchor investors. The anchor book had a nice mix of domestic and global institutions, reflecting solid institutional interest. This pre‑IPO support gave the company a cushion and signaled confidence that some big players see long‑term value in Fractal’s AI journey.
For a retail investor like myself, seeing strong anchor participation can be reassuring – it tells you that seasoned money managers have done their homework and are comfortable with the business model.
Why the IPO size was cut – from Rs 4,900 crore to Rs 2,833.9 crore
Initially, Fractal had filed draft documents in August with a plan to raise Rs 4,900 crore. But the final offer size is now Rs 2,833.9 crore – less than half of the original plan. The revised mix includes a fresh issue of equity worth up to Rs 1,023.5 crore and an offer‑for‑sale (OFS) of Rs 1,810.4 crore.
Why the cut? While the exact rationale isn’t spelled out in the press releases, it’s common for companies to trim the size if they feel the market may not absorb the larger amount without putting excessive price pressure. In this case, the softer subscription numbers may have nudged Fractal to pare down the fresh issue and rely more on the OFS side, where existing shareholders are selling their stakes.
The sellers in the OFS include names like Quinag Bidco Ltd, TPG Fett Holdings Pte. Ltd, Satya Kumari Remala Rao, Venkateswara Remala and GLM Family Trust.
Planned use of proceeds – growth, tech upgrades and more
Fractal has laid out a fairly detailed plan for the money it raises:
- Invest in its US subsidiary, Fractal USA, mainly for pre‑payment or repayment of borrowings.
- Purchase laptops and other hardware – basically to upgrade the tech stack of its workforce.
- Set up new offices across India, signalling a push for a larger domestic footprint.
- Invest heavily in research and development – a must‑have for an AI‑centric company.
- Support sales and marketing under the Fractal Alpha brand.
- Fund potential acquisitions and other strategic initiatives.
- General corporate purposes, which is the catch‑all line you see in most IPOs.
From a personal perspective, the emphasis on R&D and new offices resonates – it shows the firm isn’t just sitting on its laurels but is actively seeking to expand its capabilities and reach.
Company background – who are the people behind the AI hype?
Fractal Analytics Ltd was co‑founded back in 2000 by Srikanth Velamakanni and Pranay Agrawal. Over the years, it has grown into a pure‑play data and artificial‑intelligence company with a strong focus on enterprise‑level solutions. Its client list reads like a who’s‑who of the tech world – names such as Microsoft, Apple, Nvidia, Alphabet, Amazon, Meta and Tesla have all engaged Fractal for AI‑driven insights.
The firm’s industry expertise spans consumer packaged goods and retail, technology‑media‑telecom, healthcare and life sciences, as well as banking, financial services and insurance. Backed by marquee investors like TPG, Apax, and Gaja, Fractal has built a reputation as a leading AI‑analytics player in India.
Its product portfolio includes the agentic AI platform Cogentiq, which offers low‑code capabilities, robust security and governance, and a suite of AI agents and connectors. On the product side, you have Asper.ai for healthcare diagnostics, Kalaido.ai for data visualisation, Vaidya.ai for medical insights, and Qure.ai for imaging analysis. All these pieces are aimed at helping large enterprises turn raw data into actionable decisions.
In terms of market positioning, Fractal claims it is uniquely placed because of its active investments in generative AI and a strong R&D pipeline. The company’s direction seems aligned with the broader global shift toward AI‑first strategies.
Final thoughts – should you apply for the IPO?
Putting everything together, here’s my take – not as a financial advisor, but as someone who’s been watching the Indian IPO space closely. The subscription numbers are low, the grey‑market premium is modest, and the valuation multiple is high. All these flags suggest caution.
On the other hand, the company’s fundamentals are improving: profitability turned positive, margins are expanding and the product suite is getting more sophisticated. Plus, the anchor book shows that institutional investors see potential.
If you’re a long‑term investor who believes AI will become a core utility for Indian enterprises and you can tolerate a high entry price, you might consider applying for a few shares – especially if you like the idea of holding a stake in a company that serves global tech giants.
But if you are more risk‑averse, the muted subscription could be a warning sign that the market isn’t convinced yet. You could wait for the listing day on 16 February, see how the share price opens, and decide then.
In short, treat it like any other high‑growth, high‑valuation IPO: do your homework, think about your risk tolerance, and decide whether the potential upside outweighs the current pricing concerns.
