Prabhudas Lilladhar initiates coverage on Fractal Analytics with 50% upside call despite weak listing

Synopsis

Fractal Analytics debuted below its IPO price, reflecting valuation concerns and cautious sentiment. However, Prabhudas Lilladhar maintained a positive long-term view, citing enterprise AI growth, platform transition and strong global client relationships despite near-term risks.

Fractal Analytics' muted market debut has sharpened focus on valuation concerns and near-term growth visibility, but Prabhudas Lilladhar argued that the long-term structural opportunity in enterprise AI remains intact. The broker initiated coverage on the stock with a target price of Rs 1,260

Shares of Fractal Analytics listed at Rs 876 on the NSE on February 16, below the IPO price of Rs 900, reflecting cautious sentiment in a market. The Rs 2,840 crore issue was subscribed 2.81 times overall, led by strong institutional demand, but retail and high net-worth participation remained modest.

Prabhudas Lilladhar said Fractal is a differentiated play in the fast-evolving enterprise AI landscape, highlighting its transition from a pure analytics services provider to an AI platform-led company. "Fractal's two operating segments, Fractal.ai and Fractal Alpha, together offer a blend of core AI services and incubation of next-generation AI ventures," it said.

Fractal.ai houses the company's core AI services and products, including its agentic AI platform Cogentiq, which aims to simplify enterprise AI deployment with built-in governance, security and low-code tools. Fractal Alpha, meanwhile, incubates standalone AI-led businesses targeting specific growth verticals and geographies. The strategy is to create optionality beyond traditional services, though monetisation timelines remain a key variable.

Prabhudas further noted that Fractal's deep relationships with marquee global clients across industries such as banking, consumer goods, healthcare and retail.

The company's top 10 clients have an average relationship tenure of more than eight years and contribute a significant portion of revenue, reflecting stickiness but also concentration risk. Clients include multinational corporations across financial services and consumer sectors, reinforcing its positioning as a trusted AI and analytics partner.

"Fractal stands to benefit from rising enterprise adoption of AI across industries, with the global AI market projected to expand meaningfully over the next few years. Its investments in research and development, sales and marketing, and platform capabilities as critical to sustaining differentiation," the broker said.

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