Fractal Files for ₹4,900 Crore IPO: Fund Use, Key Risks, and What Investors Should Know

Enterprise AI company, Fractal Analytics has filed its draft red herring prospectus with the Securities and Exchange Board of India (Sebi) on August 12. Notably, Fractal will be the first AI-focused firm to tap into the public market for IPO worth ₹4,900 crore.

Currently, several consumer and fintech start-ups are eyeing IPOs in 2025. However, India is now poised for its first AI listing with Fractal Analytics amid the technological shift. InMobi, the new-age company which has a huge AI focus, is preparing to launch its IPO. Another AI-based SaaS platform, Capillary Technologies has also filed its IPO papers in June 2025.  

How Is Fractal IPO Structured?

The IPO will be a mix of a ₹1,279.3 crore fresh issue and ₹3,620.7 crore worth of offer for sale shares. The company is expected to launch its IPO by December 2025. The AI platform may also consider a pre-IPO placement of up to nearly ₹2,55.8 crore.

The offer will follow the book-building process under Regulation 6(2), with 75% of the net offer reserved for qualified institutional buyers (QIBs), 15% for non-institutional investors, and 10% for retail investors. Besides this, the company will set aside up to 5% of its post-offer paid-up equity share capital for eligible employees under the Employee Reservation Portion.

Kotal Mahindra Capital, Morgan Stanley India, Axis Capital, and Goldman Sachs (India) are the book running lead managers to the IPO.

How IPO Funds Will be Used?

The company plans to use the net proceeds from the offer vor various purposes, such as in its subsidiary ‘Fractal USA’ to pre-pay or repay borrowings, purchasing laptops, and establishing new office premises in India.

The funds will also be directed towards research and development, sales and marketing under Fractal Alpha, as well as supporting inorganic growth through potential acquisitions, other strategic initiatives, and general corporate purposes.

Who Will Offload Shares?

Its existing shareholders, including Apax (Quinag Bidco), TPG Fett Holdings, Satya Kumari Remala, Rao Venkateswara, and GLM Family Trust will offload their shares in the offer for sale proceeds.

Quinag Bidco and TPG will be selling shares worth ₹1,462 crore and ₹1,999 crore, respectively. Its angel investors, Remalas will sell equity shares of face value ₹1 each, aggregating up to ₹295 million, with a weighted average cost of ₹2 per share.

GLM Family Trust will also offload its equity stake in the company, selling shares of face value ₹1 each, aggregating up to ₹1,290 million, with no cost of acquisition recorded, according to the DRHP.

What Are Key Risks?

Fractal, in its draft papers, revealed that the company’s success depends on its ability to attract, retain and expand relationships with the clients. It derived over 53% of revenue from operations from Fractal.ai segment from its top 10 clients. Of this, one client contributed 9.8% of its revenue in fiscal year 2025.

The company also derived 80.8% of its revenue from operations in Fractal.ai segment from its existing “Must Win Clients” in FY2025. “If we cannot maintain and expand our relationships with our existing client base or add new clients, our business, financial condition, cash flows, and results of operations may be adversely affected,” the statement read.

The company stated that its business depends on the quality and successful implementation of its AI solutions, and delays or failure in meeting contractual timelines or client expectations could lead to cost overruns, loss of business, and disputes, which may adversely impact its business, financial condition, and results of operations.

It added that the development and use of AI, including generative AI, require it to retain skilled talent, and failure to attract, retain, train, and optimally utilise such professionals, or a rise in employee costs, could prevent business growth and reduce profitability.

How Fractal Performed in FY25?

The company reported nearly 25% increase in its revenue from operations to ₹2,765 crore in FY25 as compared to ₹2,196 crore in the previous fiscal year. Its profit after tax also surged to ₹220 crore in FY25 from ₹54.7 crore in the financial year 2024.

PAT margin rose to 12.6% from 0.2%, while EBITDA margin improved to 17.4% from 10.6%. Between 2023 and 2025, Fractal recorded an 18% CAGR, outperforming the 11% growth rate of third-party data, analytics, and AI services firms, the company said.

The company’s founders Srikanth Velamakanni and Pranay Agawal, along with their families, hold a combined 20% stake in the company. Its employees own 17% through the ESOP program. Currently, Fractal is valued at $2.4 billion, following a $172 million secondary share sale last month.

The firm entered the unicorn club in 2022 after raising $360 million from TPG Capital Asia and has secured a total of $855 million in funding to date.

The company partners with Fortune 500 firms to improve decision-making through analytics and recently teamed up with OpenAI to provide custom AI model solutions and AI agents for clients. The US remains its largest market, contributing about 65% of revenue, followed by Europe at 16%.