Fractal cofounder sees opportunity in partnering OpenAI, Anthropic

Fractal co-founder Srikanth Velamakanni said the company expects to benefit as OpenAI and Anthropic accelerate efforts to embed AI tools across enterprise workflows

Fractal sees a huge opportunity to partner with OpenAI and Anthropic as the makers of frontier models gear up to embed their artificial intelligence (AI) products in enterprise workflows, its co-founder Srikanth Velamakanni said.

 

AI companies such as Fractal are also fiercely competing to grab a larger slice of the enterprise adoption pie, which has lagged expectations but still holds immense promise, according to executives. Some reasons for the slower adoption include siloed data across enterprises, complex workflows, security and governance concerns, and workplace transformation issues.

 

“It will be a huge opportunity for us to partner with both or either of them as it just shows the quality of expectations and the market-making activity. When a market is built, every participant benefits from it, especially the high-quality participants. We will be a huge beneficiary from something like this,” Velamakanni told Business Standard in an interaction after the company’s fourth-quarter results.

 

 

As enterprise adoption of AI has lagged expectations, large language model (LLM) providers appear to have taken it upon themselves to ensure their products are embedded across workflows. This would not only lead to quicker revenue realisation but also justify the billions of dollars they have been spending to refine their flagship products.

 

Anthropic announced last week a $1.5 billion partnership with Blackstone, Hellman & Friedman, and Goldman Sachs to form an AI services company. Similarly, OpenAI is raising about $4 billion from 19 investors, including TPG, Bain Capital, and Brookfield Asset Management, to set up The Deployment Company.

 

On whether he sees the two giants as threats for AI-native companies and service providers, Velamakanni said it was not a zero-sum game.

 

“It would be, if the pie was only 100 and a new player comes in and I know that I have to give some of that 100 to them also. That's a traditional way of thinking. The pie is moving from 100 to 1,000. So you have a lot of room for everybody to come and win. It creates higher standards and drives the overall growth.”

 

Indian information technology (IT) service providers peg this opportunity at almost $300 billion — delivering AI services to enterprises. However, he also cautioned that the new ecosystem would lead to acquisitions because that would be the way for OpenAI and Anthropic to scale faster.

 

For the fourth quarter, Fractal’s consolidated profit after tax doubled to Rs 116 crore compared to a year earlier, driven by growth in the healthcare and life sciences segment. Revenue rose 17 per cent to Rs 886 crore.

 

The healthcare business was up 82 per cent, while banking, financial services and insurance (BFSI) grew 42 per cent. Adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) margin stood at 22 per cent.

 

“We will continue to work on improving our gross margins in terms of change of mix towards output-based contracts. That will give us more leverage. Our SG&A came down from 26.5 per cent to about 22 per cent. Those are absolutely sustainable,” said chief financial officer Ashwath Bhat.