Fractal Analytics is planning to raise an aggregate of ₹4,900 crore. Three-quarters of the funds raised will not be used for any capital expenditure. The high-profile book-running lead managers will make the issue a success!
The company’s initial public offering (IPO) aims to raise an aggregate of ₹4,900 crore. However, three-quarters of the funds raised will not be used for any capital expenditure. The high-profile book-running lead managers will make the issue a success by managing oversubscription, leading to fixing the upper band of the price range.
Fractal Analytics’ IPO plan consists of ₹3,621 crore via an offer for sale and ₹1,279 crore through a fresh issuance of equity shares. The company is raising a sum that is more than double its reported turnover for 2023-24. The face value of each share is ₹1. Three-quarters of the total IPO proceeds will not go to the company. The company has filed a 606-page prospectus with the Securities and Exchange Board of India (SEBI) to float the issue.
It seems the capital market has become a space more for private equity firms to offload their holdings, rather than a platform for companies to raise capital. The funds raised through the fresh issue of equity, which amounts to ₹1,279 crore, are intended for investment in one of its subsidiaries, Fractal USA, to prepay in full or in part its borrowings; purchase laptops; establish new office premises in India; invest in R&D; carry out sales and marketing activities through Fractal Alpha; fund inorganic growth via unidentified acquisitions and other strategic initiatives; and cover general corporate expenses. The company, founded by Srikanth Velamakanni and Pranay Agrawal, reported a revenue of ₹2,765 crore for the financial year 2024-25, up from ₹2,196 crore the previous year, representing a 26 per cent increase. In the year before the IPO, many companies report impressively high top-line figures and record unprecedented improvements in net profit. Fractal posted a net profit of ₹220.60 crore in the financial year 2024-25, compared to a net loss of ₹55 crore the previous year.
Private equity and venture capital investors typically invest in early-stage companies with scalable business models. At that stage, the size of the investment can naturally exceed the company’s turnover.
Once the company reaches its maximum size and growth prospects diminish, investors exit. Some companies may cite their investment tenure or maturity cycle as reasons for their exit.
Historically, the post-listing performance of most companies that have issued an offer for sale, along with a secondary offer to capitalise on IPO premiums, has not been very impressive in the long run. Initial hype often comes from angel investors, who exit after some time, leaving retail investors high and dry.
Although the premium has yet to be decided, the offer will be one of the costliest among the issues of recent times; the post-listing share price may likely fall below the offer price.
With high-profile book-running lead managers such as Kotak Mahindra Capital, Morgan Stanley, Axis Capital, and Goldman Sachs (India) Securities managing the offer, sellers of the equity will likely receive the upper end of the price band after oversubscription.
