Fractal Industries Ltd.

About Fractal Industries

Incorporated in January 2020, Fractal Industries designs, sources and manufactures garments and provides end-to-end warehousing and supply chain management services for e-commerce platforms including Myntra, Ajio and Flipkart. Its products cover top-wear, bottom-wear, ethnic wear and outer-wear for men, women and children. The manufacturing unit is in Mumbai, with monthly capacity of over 200,000 garment units, and warehouses across Gujarat, Maharashtra, Haryana, West Bengal and Karnataka. The company is preparing to commercially launch its own brand, 7ate9.

Fractal Industries IPO Details

Use of Issue Proceeds

• Working capital: 36.50 INR Cr. of the issue proceeds is earmarked for funding working capital.
• General corporate purposes: 7.35 INR Cr. is allocated to general corporate purposes.

Fractal Industries Strengths

• Shift to a higher-margin model: The company moved from outright B2B sales toward the PPMP model, which represented 92.47% of revenue mix in FY25 and 92.76% in Sep'25. Management cited EBITDA margins of 7%–8% in B2B and 19%–20% under B2C.
• E-commerce platform relationships: The company holds licenses for Myntra brands including Roadster, Harvard, Ether, Invictus and Mast & Harbour. Agreements for Amazon's Inkast and Ajio's Buda Jeans Co are intended to broaden its platform presence.
• Own-brand opportunity: 7ate9 is being launched in collaboration with Myntra. Management is targeting ₹15 Crore in revenue for the current year; sales and customer response remain unproven.
• Pan-India operating footprint: The Mumbai manufacturing unit has monthly capacity of over 200,000 garment units, supported by warehouses in five states.

Fractal Industries Key Financials

Revenue recovered to 85.4 INR Cr. in FY25 after 49.9 INR Cr. in FY24, while reported EBITDA margin rose to 19.6% in H1FY26. The company reported debt of 24.6 INR Cr. and Debt/Equity of 1.0x for H1FY26.

IPO Valuation and Our View

At the issue price of INR 216/-, the issue is valued at 22.5x FY25 PAT and 12.7x annualized H1FY26 PAT. The report notes that the sustainability of the margin improvement remains monitorable. As the risks are assessed to outweigh the investment potential, Minerva Capital Research Solutions recommends Avoid.

INR 216/-

IPO price

~INR 169.54 Cr.

Market capitalisation

Avoid

Recommendation

Key Risks

• Customer concentration: The report highlights Myntra as the principal customer, with approximately 95% of FY25 revenue and approximately 78.5% of H1FY26 revenue attributed to one customer in the risk discussion.
• Working capital-intensive operations: The shift in business model raises inventory needs, while receivables are linked to sales realization.
• Leverage: The report says Debt/Equity is 1.0x+ and warns that an adverse business scenario could increase the ratio further, despite IPO proceeds being expected to meet working capital needs.
• Own-brand execution: 7ate9 sales have not yet been commercialized; marketing costs and customer feedback remain monitorables.
• Related-party exposure: The report states that approximately 51% of revenue was from sales to Fractal Fashion, a promoter's proprietorship, and notes no such sales in FY25 and H1FY26.

Business Model and Operations

The PPMP model involves design, sourcing and manufacturing under brands owned by e-commerce platforms. Payments are linked to the platform sales price net of commission, and the company takes on demand-forecasting responsibility. The report notes that capacity utilization was 76.77% in FY25 and 62.16% in Q1FY26; installed capacity fluctuates because the company also outsources manufacturing to third-party vendors.

Peer Comparison

Bang Overseas Ltd. is the peer mentioned in the RHP. The report's comparison shows Fractal Industries at 22.5x (basis FY25 PAT) and Bang Overseas at 11.2x (TTM) PE Ratio.

Management

Pankaj Bishwanath Agrawal is Promoter, Chairman and Managing Director and has over 22 years of industry experience. Priti Pankaj Agrawal is a promoter with 22 years of experience in supply chain management and apparel manufacturing. The report states that promoter and promoter group shareholding is 97.15% pre-issue and 69.07% post-issue.

Apparel Industry

As per the RHP, the Indian apparel industry is projected to grow at 3.93% CAGR to reach ~INR 162 Bn. by 2034 from ~INR 110 Bn. in 2024.

Our View

Fractal Industries has shifted toward a higher-margin marketplace model and reported improved margins, but its revenue base remains concentrated and working capital needs are significant. The sustainability of margins and the launch of 7ate9 are key monitorables. Minerva Capital Research Solutions recommends Avoid the issue.

Standard disclosures

• Research Analyst has served as an officer, director or employee of subject company(ies): No
• We or our associates have received compensation from the subject company(ies) in the past 12 months: No
• We or our associates have managed or co-managed public offering of securities for the subject company(ies) in the past12 months: No
• We or our associates may have received compensation for investment banking or merchant banking or brokerage services from the subject company(ies) in the past 12 months –No
• We or our associates may have received compensation or other benefits from the subject company(ies) or third party in connection with the research report –No
• We or our associates or Research Analyst or his/her relative's financial interest in the subject company(ies)- No
• Nature of financial interest in subject company, if any –Nil
• We, our associates or Research Analyst have actual/beneficial ownership of 1% or more securities of the subject company (ies) at the end of the month immediately preceding the date of publication of Research Report – No
• Subject company (ies) may have been client during twelve months preceding the date of distribution of the research report-No.
• We or our Associates or Research Analyst are engaged in market making of subject company – No
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Regulatory disclosures

Minerva Capital Research Solutions is an independent investment advisory firm founded by Nishant Gupta(SEBI registration no. INH000018896).

Registration granted by SEBI and certification from NISM in no way promise or guarantee that the research recommendation will provide any assured, minimum or risk-free return to the investors.

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Rating rationale

Minerva Capital Research Solutions endeavors to provide objective opinions and recommendations. Ratings are assigned to stocks according to their fair value vs current market price and then categorizes them as Buy, Hold, Reduce, Sell. The performance horizon is one year unless specified and fair value is defined as analyst’s valuation for a stock.

• Buy:> 15%
• Hold: -5% to 15%
• Reduce: -15% to -5%
• Sell: <-15%