Fractal's revenue nears Rs 1,300 Cr in FY22, slips into losses

Artificial Intelligence firm Fractal entered the unicorn club after raising $360 million from TPG in January this year. The $1 billion valuation for the 22-year-old firm followed its decent growth in revenue which approached Rs 1,300 crore in FY22.

However, the firm has slipped into losses as its employee and legal costs outpaced its revenue growth. We will analyze Fractal’s expenses and losses in the second half of the story. For now, let’s focus on the revenue side. Its operating scale grew 48.3% to Rs 1,295 crore in FY22 from Rs 873 crore in the previous fiscal year (FY21), according to the firm’s consolidated financial statements with the Registrar of Companies.

The Mumbai and New York-based company offers artificial intelligence and analytics solutions to power the retail, healthcare, technology, financial, and insurance sectors with its flagship products: Qure.ai, Crux Intelligence, Theremin.ai, Eugenie.ai, and Samya.ai.

Analytics and consulting services contributed 96% of the total revenue which grew 44.1% to Rs 1,244 crore in FY22. Collection from licensing and subscription fees ballooned 4X to Rs 51 crore in FY22. It also made Rs 19 crore from financial instruments.

When it comes to cost, employee benefits accounted for 74% of the overall expenses and surged 72.7% to Rs 1,088 crore in FY22 from Rs 630 crore in FY21. For context, the firm has over 3,500 employees across 16 global locations, including US, UK, Ukraine, India and Singapore.

Legal and professional fees turned out to be the second largest cost which shot up 73.5% to Rs 85 crore in FY22. Fractal added Rs 28 crore each on software maintenance charges and insurance which pushed its overall cost by 73.7% to Rs 1,461 crore during the previous fiscal year.

Due to sharp rise in overall expenses, the company has slipped into losses (Rs 148 crore) in FY22  against Rs 36 crore profit in FY21. Its ROCE and EBITDA margin also turned negative with -9.26% and -4.91%. On a unit level, Fractal spent Rs 1.13 to earn a single rupee in FY22.

Fractal competes with MuSigma, Tredence, and Quantiphi Analytics. It’s also eyeing an initial public offering at a $2.5 billion valuation but the company is yet to disclose any specific timeline for the IPO.