Fractal Analytics crossed its IPO price for the first time since listing as the stock rallied 8% in two sessions, even as retail ownership slipped in Q4. Experts say the AI theme remains strong but caution that sustained gains depend on the stock holding key support levels amid lingering weak sentiment.

AI pure-play Fractal Analytics crosses IPO mark first time since listing amid slipping retail ownership. What's the outlook?

Synopsis

Fractal Analytics crossed its IPO price for the first time since listing as the stock rallied 8% in two sessions, even as retail ownership slipped in Q4. Experts say the AI theme remains strong but caution that sustained gains depend on the stock holding key support levels amid lingering weak sentiment.

An 8% rally in the past two trading sessions helped Fractal Analytics cross its initial public offering (IPO) price on Wednesday for the first time since its listing in February. India’s first pureplay AI company, which launched a Rs 2,844 crore public issue, has struggled to attract retail investors, with their shareholding falling by 110 bps in the March quarter despite AI remaining a major market buzzword.

By retail ownership, we mean individual investors holding shares worth Rs 2 lakh in a company.

Retail investors held nearly 1.39 crore shares, or an 8.08% stake in the company, as per BSE shareholding data filed on February 16 — the stock’s listing day. This declined to 1.20 crore shares, representing a 6.98% stake, in the March quarter, according to the latest data released on April 20.

Fractal Analytics boasts investments from an ensemble of marquee investors. The company raised Rs 1,249 crore from anchor investors including leading mutual funds such as SBI Mutual Fund, ICICI Prudential Mutual Fund, Motilal Oswal Mutual Fund and UTI Mutual Fund. Insurance stalwarts like the Life Insurance Corporation of India (LIC), HDFC Life Insurance and SBI Life Insurance also participated in the anchor bidding.

Founded in 2000, Fractal is an enterprise AI company delivering data-driven insights and assisting businesses in their decision-making through its end-to-end AI solutions.

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The IPO of Fractal Analytics opened for bidding on February 9 and closed on February 11 at a price band of Rs 857 to Rs 900. The offer, a combination of a fresh issue of 1.14 crore shares aggregating to Rs 1,025.58 crores and an offer for sale (OFS) of 2.01 crore (Rs 1,808.32 crore), saw the retail quota fully subscribed (1.03 times).

The overall subscription stood at 2.66 times, led by Qualified Institutional Buyers (QIBs) who bid for their allocated quota 4.18 times.

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Fractal's share price performance

The stock had a lackluster listing at Rs 900 on the BSE and at Rs 876 on the NSE, recording a 2.7% discount over the issue price. Today, it bettered its previous high of Rs 921, hitting the day's high of Rs 929 before closing at Rs 905.

The stock had a muted debut, listing at Rs 900 on the BSE and Rs 876 on the NSE, a 2.7% discount to the issue price. It later surpassed its previous high of Rs 921, touching an intraday peak of Rs 929 before settling at Rs 905.

What should investors do?

While the sentiment for the stock remains subdued, Dr. Ravi Singh, Chief Research Officer from Master Capital Services calls the AI space structurally strong and potentially lucrative. However, he cautions investors to not fall for euphoria around any new-age theme.

Notwithstanding the earlier drop in retail participation, confidence seems to be returning, albeit slowly. "For now, the short-term trend has definitely improved. But for this move to sustain, the stock needs to hold above 880–900. If it manages that, upside can continue; otherwise, it may slip back into a consolidation phase," Dr. Singh said.

"Fractal Analytics is finally showing some signs of recovery after a pretty weak start post listing. The bounce from the 740–750 zone has been quite sharp, which clearly suggests that fresh buying has come in at lower levels. That said, this still feels more like a recovery after a steep fall rather than a strong, long-term breakout. The 920–940 zone will be crucial to watch, as the stock faced selling pressure here earlier—so some resistance is likely," he added.

Ashwini Shami, President & Chief Portfolio Manager at OmniScience Capital told ETMarkets that the theme in India is at a very nascent stage unlike in developed economies. He sees AI promise in sectors like power and data centers.

Shami also refused to buy the view that AI could potentially cannibalise the IT sector, arguing that AI will need the support of tech services and cannot function independently.

Brokerages like SBI Securities and Angel One had taken a 'Neutral' view on the IPO around the launch time.

(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)

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