Fractal Industries IPO Review 2026: Financials, Business Model, Risks & Valuation Analysis

Fractal Industries Limited is launching its SME IPO on the BSE SME platform, aiming to raise capital through a fresh issue of approximately ₹ 49 crores, with proceeds primarily earmarked for working capital and business expansion.

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Before the Deep Dive: What’s Working — and What Isn’t

Now that you’ve seen the snapshot, let’s unpack the full story behind these numbers and understand the business in context.

Industry Overview 

India’s retail and fashion ecosystem is entering a structural growth phase, backed by a consumption-led economy and rising formalization. The Indian retail market has crossed US$ 1 trillion and is projected to grow at ~8–10% CAGR, with organized retail steadily expanding its share. Within this, the apparel market (~US$ 100+ billion) is expected to grow at ~10–12% CAGR, driven by urbanization, increasing per capita income, and aspirational brand demand. Government initiatives such as the Production Linked Incentive (PLI) scheme for textiles and apparel, GST-led supply chain formalization, and the National Logistics Policy are structurally improving manufacturing competitiveness and distribution efficiency. As India positions itself as both a large consumption market and a global sourcing hub, organized players with scalable manufacturing and distribution capabilities are likely to capture a disproportionate share of growth over the next decade.

Fractal Industries Limited was incorporated in January 2020 in Mumbai by Pankaj Bishwanath Agrawal and Priti Pankaj Agrawal. What started as a private venture has grown into a textile and apparel-focused business, engaged in manufacturing and supplying garment products, building its presence in a highly competitive industry.

In 2025, the company converted into a public limited entity, signaling its intent to scale. Now, within five years of incorporation, Fractal is stepping into the SME IPO space and moving from founder-led growth to public-market ambition.

Business Model

Fractal Industries operates through multiple business models, giving it flexibility in how it earns revenue.

1. Outright Sale Model (Wholesale to Marketplaces)

In this model, the company manufactures garments (in-house or through job work vendors) and sells them directly to platforms like Myntra, Ajio, or Flipkart at a fixed wholesale price. Once delivered, ownership shifts to the platform.

The marketplace handles branding, warehousing, inventory, fulfillment, and customer sales. Fractal’s role is largely limited to manufacturing and addressing quality issues. This is a volume-driven, lower-risk model.

2. PPMP Model (Pure Play Marketplace Model)

Here, the company designs and manufactures garments under marketplace-owned brands and sells them through the platform, which charges a commission.

Unlike the outright model, Fractal manages forecasting, inventory, warehousing, and order fulfilment through tech-enabled warehouses integrated with WMS. It controls the full supply chain until the product is handed over to the logistics partner.

This model offers better control and potentially higher margins but comes with inventory and execution risk.

3. Direct Sale (Own Brand – “7ate9”)

Under this model, the company manufactures and sells garments under its own brand, “7ate9,” through online platforms.

It manages everything — production, warehousing, fulfillment, and returns. While this gives higher margin and brand ownership, it also carries higher marketing and inventory risk. Commercial sales are expected to begin in FY 2025–26.

Overall, Fractal blends stable volume-driven business with higher-margin retail exposure — creating a hybrid apparel business model designed for both scale and margin expansion.

Revenue has completely transitioned from the Outright Model to the PPMP Model. While FY23 was entirely driven by outright sales, by FY25 and H1 FY26 over 92% of revenue comes from PPMP, showing a decisive strategic shift toward a marketplace-integrated operating model.

Revenue Bifurcation based on Segments

The revenue mix has shifted sharply from B2B to B2C. While FY23 and FY24 were largely B2B-driven, by FY25 and H1 FY26 over 92% of revenue came from B2C, reflecting the company’s strong pivot toward a marketplace-led consumer-focused model.

Revenue Bifurcation based on Marketplace

Revenue is heavily concentrated toward Myntra, contributing nearly 95% of revenue in FY25 and around 78–79% in H1 FY26. The company has gradually reduced reliance on the “Others” category and is increasingly dependent on a single large marketplace, indicating rising platform concentration risk.

Revenue Bifurcation based on Geography

Revenue concentration has shifted significantly over time. While Gujarat dominated in FY23 and FY24, FY25 shows a sharp spike in Karnataka (60.6%), indicating geographic concentration risk. In H1 FY26, revenue appears more distributed between Gujarat and Maharashtra, suggesting some normalization in regional mix.

Revenue has been volatile, from ₹8,891 lakhs in FY23 it fell sharply to ₹4,994 lakhs in FY24 (-43.8%), before rebounding to ₹8,545 lakhs in FY25 (+71.1%). H1 FY26 revenue stands at ₹4,730 lakhs. While growth has recovered, the sharp swings raise concerns about revenue stability and dependence on specific models/platforms.

Margins have improved meaningfully. EBITDA margin expanded from 4.7% in FY23 to 13.0% in FY25 and further to 19.6% in H1 FY26. PAT margin also rose from 3.0% to 8.8% and now 14.3%. This suggests better operating efficiency and possibly a favourable shift in revenue mix.

Return ratios remain strong but inconsistent. ROE moved from 58.2% (FY23) to 32.3% (FY24), then surged to 63.2% (FY25). Such sharp movement indicates earnings volatility and potential leverage impact.

Leverage has improved as debt-equity reduced from 2.7x in FY24 to 1.8x in FY25 and 1.0x in H1 FY26 — which is a positive sign. However, historically high leverage remains a red flag.

Working capital is the bigger concern. Inventory days remain elevated (125–151 days), and CCC was very high at 141 days in FY23 and 108 days in FY24. Although CCC improved to 27 days in H1 FY26, the historical stretch indicates cash flow pressure and possible inventory risk. Also, the finished goods to sales ratio has risen sharply to 54.2% in H1 FY26, indicating elevated inventory levels relative to revenue and highlighting potential working capital and demand absorption risks. 

Overdue receivables above six months were extremely high at 83.7% in FY23 and 51.6% in FY24, but have reduced to 0% in FY25 and H1 FY26, indicating a significant cleanup in receivables quality.

Management & Promoters 

The company is promoted by Pankaj Bishwanath Agrawal and Priti Pankaj Agrawal, who have led the business since its incorporation in 2020.

Mr. Pankaj Bishwanath Agrawal serves as the Chairman and Managing Director and brings experience in the textile and apparel business, overseeing strategy, operations, and marketplace relationships. Mrs. Priti Pankaj Agrawal is also a Promoter and has been involved in supporting the company’s growth and operational development.

Overall, the management remains closely aligned with the business, with leadership continuity from inception through IPO stage.

IPO Objectives 

The company proposes to utilize the IPO proceeds primarily towards funding its working capital requirements, supporting inventory buildup and operational expansion.

Peer Analysis

At first glance, Fractal Industries appears financially stronger than Bang Overseas. While Bang Overseas reported revenue of ₹189 crore, its margins are negative (EBITDA margin -2%, PAT margin -1.1%) and ROE stands at -2.5%. In contrast, Fractal, with revenue of ₹86 crore, delivered an EBITDA margin of 13%, PAT margin of 8.8%, and a strong ROE of 63.2%.

However, these two companies are not strictly comparable as given in DRHP. Bang Overseas operates as a traditional branded apparel exporter and retailer with a different business mix and asset structure, whereas Fractal follows a marketplace-integrated, inventory-driven model (PPMP) with a strong B2C focus. Their working capital structures, channel strategies, and revenue recognition models differ significantly.

So while valuation multiples like P/E (11.7x vs 12.5x) may look similar, the underlying business models, scale, and risk profiles are materially different — making direct comparison limited in relevance.

Through LMVT Framework:

Leadership: The promoters have rapidly shifted the business from wholesale to a marketplace-led PPMP model, significantly improving margins and ROE. However, revenue volatility and high working capital intensity mean execution discipline will be critical going forward.

Moat: There is no clear moat. The company operates in a competitive, low-entry-barrier apparel ecosystem and is heavily dependent on marketplace relationships, creating concentration risk.

Valuation: At ~12–13x P/E, valuation appears reasonable given improved margins and strong ROE. That said, recent earnings growth follows a volatile period, so sustainability remains the key monitorable.

Tailwinds: Growth in India’s online apparel market and increasing marketplace penetration provide structural support to the PPMP-driven model.

Bottom Line: While profitability and leverage have improved, revenue swings, past high CCC, and platform dependence remain concerns. The story is improving but still execution-sensitive. Suitable for higher risk appetite investors; conservative investors may wait for consistency.