Investor needs to know AI is transformative: Fractal CEO Velamakanni

Enterprise AI firm Fractal Analytics sets ₹857-900 IPO price band as cofounder Srikanth Velamakanni bets on long-term growth, R&D and India's AI future

Fractal Analytics on Wednesday announced the price band for its initial public offering (IPO) at ₹857–900 per share. The IPO comprises a fresh issue of equity shares aggregating up to ₹1,023.5 crore and an offer for sale of equity shares aggregating up to ₹1,810.4 crore, targeting a valuation of around ₹15,840 crore at the upper band. In a virtual interview, Srikanth Velamakanni, chief executive officer and cofounder of Fractal, spoke to Shivani Shinde about the IPO and the company’s plans. Edited excerpts:

 

Fractal is the first artificial intelligence (AI) company in India to go public. How do you see this as a founder? 

It’s a meaningful step towards building Fractal for the next hundred years. That’s how I see it. Beyond that, it also sets the right governance expectations. Overall, it’s a strong move towards creating an institution for the future. We’re very excited about it.

 

The IPO size has been reduced compared to initial expectations. Why? 

When pricing the IPO, we wanted it to be attractive for incoming investors, especially since enterprise AI is still not fully understood in India. We received guidance that pricing should allow investors to see potential returns. At this price point, many of our existing investors preferred to stay invested rather than sell, which reduced the overall issue size.

 

Globally, there’s a debate over whether AI is a bubble. Do you think Indian retail investors are mature enough to understand this business, or will they just ride the AI wave? 

Anyone claiming to fully understand how AI will reshape the world is probably overstating it. This is one of the most defining technologies of our time — like the internet, but 10x faster and 10x better.

 

Most people don’t fully grasp how AI will change the world. Retail investors don’t need to understand every technical detail — they need to recognise that AI is transformative and already widespread. About 10 per cent of the world is using ChatGPT, which has 800 million weekly active users, as well as other AI platforms like Gemini. AI is accessible to the masses, and that gives investors a sense of how good an AI company can be.

 

Will your research and development (R&D) investments continue to increase over time? Do you have a benchmark in mind? 

Yes, we aim to systematically increase R&D spending. Global tech companies spend about 14 per cent of revenue on R&D. We may not reach that, but we want to be significantly above where we are today and far above the average Indian company.

 

Most Indian companies spend just 0.3–0.5 per cent of revenue on R&D, which is almost negligible. We want to be much more R&D-focused. Last year, we spent 5.2 per cent of revenue on R&D, and we plan to continue increasing that. Being R&D-intensive is critical to what we want to build.