PE firm TPG invests $360 mn in AI and analytics services firm Fractal

PE player Apax is exiting partially via this fund raise. It had invested $200 million in Fractal in 2019

Private equity firm TPG is investing $360 million (around Rs 2,700 crore) in Fractal, an AI and analytics services provider, through TPG Capital Asia. The transaction, which includes a combination of primary investment and secondary share purchase, is expected to close by the first quarter of 2022.

Though the company did not disclose the valuation post the fund raise, senior management said that the company is well above the $1 billion valuation mark.

PE player Apax is making a partial exit through this fund raise. The company did not disclose how much Apax diluted in this round of investment. Apax had invested $200 million in Fractal in 2019. The company was then valued over $500 million.

Srikanth Velamkanni, co-founder and CEO of the company said that the funds will be used for acquisitions as well as to broaden its R&D capabilities to create more products. “We have been expanding the pool of capital we have and have been investing significantly in both M&A and incubating new products within Fractal. We have rather invested 15-20 per cent of our revenue on building new ideas and products,” added Velamkanni. In 2021 the company acquired five companies.

This deals will also mean that TPG will open doors for Fractal to take its products offerings. “TPG has a large portfolio of investments. Fractal’s genral definition of client falls in what we call the 10-20-30 bracket. This means $10 billion in revenue, $20 billion market cap or serve 30 million consumers. So there are only 600 companies that fall in the $10 billion revenue segment. We expect that TPG will be helpful in growing the business,” added Velamkanni.

"In the growing market for data and analytics services, Fractal continues to stand out as one of the most well-established, differentiated providers and a clear leader in AI and advanced analytics," said Puneet Bhatia, Co-Managing Partner of TPG Capital Asia.

"The quality of Fractal's offering has enabled them to build a deep and loyal client base, made up of some of the world's largest and most respected companies. Srikanth and Pranay have built a highly respected and market leading company, and we are excited to partner with this proven management team to continue to enhance Fractal's organic and strategic growth."

Fractal has been a profitable company since the second year of its operations. The company will end the fiscal year (FY22) with a revenue of Rs 1,400 crore. Velamkanni said that the company has been growing at 40-45 per cent YoY.

As part of the transaction, TPG's Puneet Bhatia and Vivek Mohan will join Fractal's board of directors. All current directors including Gavin Patterson, Rohan Haldea, Shashank Singh, and Gulu Mirchandani will continue to serve on the company’s board.

Rohan Haldea, Partner at Apax and Shashank Singh, Partner at Apax, in a statement said: "Since partnering with Fractal, we have been able to combine the Company's strong value proposition and unique culture with Apax's deep tech expertise to drive the business forward. We are proud of the progress the Company has made to date alongside Srikanth and Pranay, establishing Fractal as one of the leading players in the rapidly-evolving analytics and AI space, and look forward to partnering with TPG and Fractal in this next chapter for the business."