Fractal Analytics shares surge on Day 2: Sandeep Sabharwal questions ‘game of Fund Managers baling out’ IPOs

The Fractal Analytics shares have surged over 6% on day 2, recovering most of yesterday’s losses after closing its debut session with 6% losses. However, the issue saw rather tepid subscription, especially by the retail segment and was bailed out by QIBs on the last day. Well-known fund manager and industry veteran Sandip Sabharwalof Asksandipsabharwal.com raised concerns about “Fund Managers baling out obnoxiously priced IPOs.” Fractal Analytics- Valuation concerns At the issue price of Rs 900, the Fractal Analytics IPO was fetching a P/E ratio of 79 times. The issue was subscribed to a total of 0.09 times on Day 02. On the last day, the issue of AI pure-play was subscribed to a total of 2.81 times, helped out by the Qualitative Institutional Buyers (QIBs), subscribing 4.4 times. Highlighting this, Sabharwal, in a social media post on X (formerly Twitter), said, “This game of Fund Managers baling out obnoxiously priced IPOs needs to stop. The writing was on the wall for FractalAnalytics. The price band was Rs 857 to Rs 900. Even if they wanted to bail out, they could have subscribed at the lower end of the price band.” He pointed out that “FIIs can do whatever they want, but MF Fund Managers should exercise more discretion.” Fractal Analytics Valuation – Expert’s take Several other analysts also raised concerns about Fractal Analytics valuations ahead of its listing. Anand Rathi Research, in its IPO note ahead of the listing, also said that the issue appears to be richly priced. Additionally, insourcing by clients, especially with the advent of AI tools, could lead to a loss of clients and impact the company’s business model. Another brokerage firm, Geojit Financial Services, said that at the upper price band of Rs 900, Fractal is valued at a P/E of 70x for FY25 and a P/E of 109x (annualised) for FY26, “reflecting an expensive valuation.” Therefore, considering the company’s healthy presence across its 4 focus industries with top MNCs as its clients and an average tenure of 8+ years across the top 10 clients, which shows its long-term growth efficiency to be sustained, said the brokerage. Fractal Analytics- Business fundamentals Fractal Analytics was established in 2000 and is headquartered in Mumbai. It is recognised as India’s first dedicated enterprise AI and advanced analytics company with a strong global footprint across the US, Europe, and Asia. Its operations are divided into two key segments: Fractal.ai, which provides services and products through its platform Cogentiq, and Fractal Alpha, which brings together a portfolio of AI-driven businesses to address diverse client requirements across industries and functions.