Fractal AI said to turn unicorn with $360 million funding from TPG

The transaction is a mix of primary investment and secondary share purchase from funds advised by Apax Partners. The British private equity firm will remain a majority shareholder in the company, according to a senior executive. While additional terms of the deal weren’t disclosed, industry sources said the investment has pegged Fractal’s valuation at more than $1 billion—making it a unicorn.

The deal is likely to close in the first quarter of 2022. The company is on track to go public in the next couple of years, Srikanth Velamakanni, co-founder and group chief executive officer at Fractal, told The Economic Times.

TPG Capital Asia, the firm’s Asia-focused private equity platform, will make the investment.

“Apax is selling part of its stake while TPG is also entering. So it’s going to be a balanced cap table with TPG and Apax along with Fractal founders and existing investors,” said Velamakanni. “The idea is to have a balanced set of shareholders as part of our long-term plan to be a public company.”

“”The fundraise will be used to further invest in products and for additional M&As. We have acquired five companies (Samya.ai, Zerogons, FinalMile, 4i and Imagna) in 2021 for about $100 million and hope to invest a similar amount in the future,” he said.

Fractal has been investing about 15% of its revenue for M&A deals, Velamakanni said. While the company is also putting money into AI and Cloud solutions, it is also keen on adding to its design capabilities. The AI startup is targeting about $190 million revenue in FY22.

Velamakanni is also keen on expanding Fractal’s geographical presence in India.

“We are also thinking about taking our offices closer to our employees who are spread all over the country right now. In addition to offices in Bengaluru, Mumbai and Gurgaon we are considering smaller offices in Chennai, Pune, Hyderabad and Kolkata,” he said. Fractal has more than 3,500 employees across 16 global locations, including the US, the UK, Ukraine, India, Singapore and Australia.

Deal Details

The latest fundraising will see TPG’s Puneet Bhatia and Vivek Mohan 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.

“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,” Puneet Bhatia, co-managing partner of TPG Capital Asia. “Srikanth and Pranay (Agarwal) 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.”

Pranay Agarwal is the other co-founder of Fractal AI.

“Since partnering with Fractal, we have been able to combine the company’s strong value proposition and unique culture with Apax’s deep technology expertise to drive the business forward,” Rohan Haldea and Shashank Singh, partners at Apax Capital, said in a statement.