India braces to see its first AI-related unicorn go public with a dual listing on the Bombay Stock Exchange and National Stock Exchange. Fractal Analytics was founded in 2000 by five graduates from the Indian Institute of Management Ahmedabad. Its rise has been meteoric, given its set of competencies and a prominent multinational client base. Enterprises included in that mix include Citigroup, Philips, and Nestle, according to news reports.
There is a certain cross-border magic in this startup’s financials. With perhaps 70% of its revenue sourced in America, rather than India, the firm benefits when the Indian rupee falters against the US dollar. It, of course, covers India-based costs in local currency. Over the past five years, the rupee has been persistently weak in foreign-exchange markets.
Other Indian tech companies, including mainstay Wipro, certainly are pushing the limits of their own artificial-intelligence capabilities, begging questions about whether investors truly benefit by allocating to Fractal, a stock whose IPO price is likely to be set at premium. For the record, we are wary of the voluminous jargon that surrounds Fractal’s underlying business. Their website copywriters, for instance, seem to have a love affair with the word “scale.”
Proceeds from the IPO may total $560 million, with an overall valuation reaching more than $2 billion. Those figures could falter if the mid-August sell-off in US technology stocks infects international markets. Equity-price volatility can scare Fractal’s bankers—including Morgan Stanley and Goldman Sachs—into postponing the deal. There may also be other issues at stake. How resilient is the company if its outsized public-sector clients begin to pull expensive contracts amid potential economic upheaval?
From our global perspective, one standout consideration favoring Fractal is its work with the Indian government on healthcare innovation. Strangely, executive management seems to be discounting that strength in favor of less-differentiating international appeal. ■
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