IPO-Bound Fractal Slips Into The Red In FY24, Reports INR 54.7 Cr Loss

En route to its public listing, SaaS unicorn Fractal Analytics reported a consolidated net loss of INR 54.7 Cr in the fiscal year 2023-24 (FY24) as against a profit of INR 194.4 Cr in the previous fiscal. While the startup had registered a gain of INR 494.9 Cr from exception items in FY23, it incurred a loss of INR 21.8 Cr in FY24 from it, the startup’s filings with the MCA revealed. 

However, the startup’s EBITDA for the fiscal year stood at INR 73.4 Cr as against an EBITDA loss of INR 118.3 Cr in the fiscal prior, its annual report showed. 

The SaaS startup’s revenue from operations surged 11% to INR 2,196.3 Cr in FY24 from INR 1,985.4 Cr in the previous fiscal year. Including an other income of INR 45.6 Cr, Fractal’s total income for the fiscal year surged 10% year-on-year (YoY) to INR 2,241.9 Cr. 

However, the startup’s annual report for the fiscal year revealed that it managed to turn profitable on a standalone level. In FY24, Fractal’s standalone profit after tax (PAT) stood at INR 123 Cr as against a loss of INR 31.1 Cr. Its total income at a standalone level surged 12% YoY to INR 1,183 Cr.

Meanwhile, the startup’s annual report also mentioned that it converted into a public company in May 2024. 

“As the Company was about to reach the threshold of maximum number of members for private companies, the Board at its meeting held on March 04, 2024 considered and recommended to the shareholders for approval at their meeting held on March 28, 2024, the conversion of Company’s status from ‘Private company limited by shares’ to ‘Public company limited by shares’ and adoption of new set of articles and memorandum of association of the Company consequent to the conversion to a public company limited by shares,” Fractal’s annual report said. 

During the fiscal, the startup appointed angel investor Sasha Gulu Mirchandani as a non-executive director and Janaki Akella as an independent director on its board.

In September last year, it was reported that Fractal was looking to file its draft red herring prospectus (DRHP) for an $500 Mn IPO with SEBI by November 2024. However, there have been no further updates on this.

The IPO is likely to value the startup at $3.5 Bn. The SaaS startup entered the unicorn club in 2022 after raising $360 Mn from TPG Capital. 

AI To Be The Focal Point Of Fractal’s Expansion Strategy

Moving forward, the startup’s founders Srikanth Velamakanni and Pranay Agrawal anticipate an uptick in top line due to increasing AI adoption.

“As AI adoption accelerates, we anticipate a significant increase in AI spending as clients embark on their digital transformation journeys. To harness this momentum, we will continue to channel our growth drivers by building comprehensive products and solutions that serve our clients end-to-end,” the founders said in the annual report. 

Fractal acquired climate focussed AI startup Eugenie in June 2024. In the same month, it sold its AI-based investment platform Theremin.ai to QiCAP.Ai. 

Fractal’s bullish future projections come in the backdrop of AI emerging as the hottest sector across the globe. Saying that AI is writing the code for humanity in this century, Prime Minister Narendra Modi in his speech at the inaugural AI Action Summit, held in Paris earlier this month, pointed out that the nascent tech can help transform millions of lives by improving health, education, agriculture and much more. 

As a result, companies are looking at external parties to expedite their AI adoption. According to Inc42’s annual investor survey “The Pulse Of Tech” for 2024, a large chunk of Indian companies are looking at AI solutions offered by established AI vendors or companies. 

In a bid to capitalise on this AI wave, Fractal’s founders said that the unicorn will look to make more investments in R&D to advance its capabilities. They said that Fractal will scale its operations through strategic M&A activities and partnerships with hyperscalers. 

It is pertinent to highlight that Fractal spent 7% of its revenue on AI R&D in FY24.

The startup launched GenAI-powered text-to-image generator Kalaido.ai, sales-oriented GenAI platform Flyfish and chatbot MarshallGoldsmith.ai during the year.

The startup also launched a medical assist multimodal model Vaidya in August 2024. The founder said would compete with state-of-the art multimodal models at answering complex questions in the medical domain,

Decoding Fractal’s Expenses

While the startup plans to double down on its AI capabilities in the run up to its IPO, it managed to curb the rise in its expenditure in FY24. Fractal’s total expenses rose a mere 1.1% to INR 2,250.6 Cr from INR 2,225.2 Cr in FY23. 

At INR 1,833.3 Cr, the startup spent the highest amount on its workforce. This was an increase of 4% from INR 1,767.2 Cr in FY23, indicative of an increase in the employee strength. 

At the end of the fiscal, Fractal’s employee count was at over 4,500. During ‘Startup Mahakumbh 2024’, Velamakanni said that Fractal was using an in-house built AI tool, Fractal 360, to streamline its hiring process. The tool generates GenAI-based questions for potential employees, catering to their strengths and weaknesses as well as the job description. 

Back then, the founder claimed that the startup hires 2,000 people every year and screens as many as 4 Lakh potential employees annually. He also said that the SaaS unicorn deploys Dexter, an AI agent, to streamline the employee experience. 

“We will continue hiring talent through robust and scalable channels such as Fractal 360 (our proprietary, AI powered hiring assessment platform), Imagineer Program (our campus recruitment program), lateral hiring program, and “return from career break” program to attract employees. We will continue to hire specialists across our career tracks, and train them through Fractal Analytics Academy (FAA) and Analytics Vidhya,” the company said in its annual report. 

Fractal allotted over 1.2 Lakh equity shares in FY24 under its ESOP schemes.