Is Fractal India’s Palantir? Decoding the first homegrown AI IPO from the company powering Nvidia, Tesla and Apple

India is expected to list its first real artificial intelligence company in the public market after Fractal Analytics received approval from capital markets regulator Sebi for its initial public offering. The company, which has spent 25 years building a global enterprise AI business from Mumbai and New York, is similar to Palantir, the US-listed analytics and decision intelligence company.The first pure-play AI IPO, which could hit markets in December, comes at a time when global enthusiasm for artificial intelligence is nearing its peak.

Buzz around Fractal IPOFractal fills a gap that existed in the Indian markets in the past few years. Despite the rapid growth of India’s tech sector, no purely AI-first company has ever listed in India. IT service providers talk about AI and deploy AI for customers, but none are built around AI models, analytics engines and decision intelligence platforms like Fractal is.

That alone makes the company important, as global investors are increasingly looking for companies that are not heavily focused on services, but on software and products.

What the company doesFounded in 2000 by Srikanth Velamakanni and Pranay Agrawal, Fractal focuses exclusively on business AI. It doesn’t build chatbots for the public or launch consumer-facing products like ChatGPT. Instead, it develops the engines that make big companies think better. The systems help improve pricing decisions, supply chain efficiency, medical diagnostics, marketing personalization, financial risk modeling, retail planning and dozens of other business activities. The company has built platforms and models that fit into its customers’ workflows and help them run their businesses faster and more accurately.

This “invisible AI” model is the closest an Indian tech company has come to Palantir, which also creates decision-making systems for large government and corporate clients.

Both companies rely heavily on data, both create platforms rather than off-the-shelf solutions, and both operate in areas where AI is applied deeply rather than superficially. Palantir has Foundry and Gotham, while Fractal has products such as Fathom, Qure.ai, Crux Intelligence and Fractal Alpha.

Both companies earn a significant portion of their revenue from a small group of large, global customers. For Fractal, more than 60% of revenue comes from the United States, where its customer list includes Microsoft, Apple, Nvidia, Alphabet, Amazon, Meta and Tesla. That number of customers was a major driver of the excitement surrounding the IPO.

Financial data

In FY25, the company reported revenues of Rs 2,765 crore, which was almost 26% higher than the previous year. More importantly, the company returned to profitability with a profit of Rs 220 crore after a loss in FY24. EBITDA margin improved sharply from 10.6% to 17.4%, indicating that the company is scaling up effectively and absorbing costs better.

These operational improvements are crucial because AI companies typically require heavy upfront investments before turning a profit.

IPO details

The IPO itself is extensive. Fractal plans to raise Rs 1,279 crore through a fresh equity issue, while existing shareholders including Quinag Bidco, TPG Fett Holdings, Satya Kumari Remala, Rao Venkateswara Remala and the GLM Family Trust will sell Rs 3,621 crore worth of shares.

According to Bloomberg, the total deal could value the company at more than $3.5 billion. Kotak Mahindra Capital, Morgan Stanley India, Axis Capital and Goldman Sachs India are the lead managers for the offering.

The company plans to use the funds from the new issue to strengthen its US subsidiary, repay loans, expand offices in India, invest in research and development, scale its generative AI products and pursue acquisitions.

Fractal’s CEO told Reuters that the company will maintain and possibly increase its already high research spending to stay competitive in a rapidly evolving industry where modeling, computing requirements and business use cases are all accelerating at the same time.

Investor interest in the IPO is also high due to broader global trends. AI spending worldwide is expected to grow sharply over the next decade, with companies and governments building new data centers, edge computing systems and AI-enabled infrastructure. India has emerged as an important market in this shift.

Google has committed $15 billion to an AI data center in Andhra Pradesh. Microsoft and Amazon are also aggressively expanding their cloud and AI infrastructure. With nearly a billion internet users and an economy where digital services are scaling rapidly, India is seen as a key testing ground for AI adoption in enterprises.

Fractal is currently entering the public markets, which increases both opportunities and expectations. Investors see the company as India’s opportunity to launch a serious AI company that doesn’t rely on traditional IT outsourcing.

Risks for the company

At the same time, the company faces risks common to advanced analytics and AI. The ten largest customers contribute more than half of revenue, meaning the loss of even one major customer can impact growth. The market is extremely competitive, with global analytics companies, cloud service providers and Indian IT companies all trying to build their own AI platforms.

Experts say the company will also have to keep its margins intact while investing heavily in new models and products.

If the IPO is successful, it could pave the way for other Indian AI companies, especially generative AI startups, healthcare AI companies and analytics products companies, to consider public markets.

(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of Economic Times)