Fractal Analytics is one of the largest independent analytics companies in the world that are operating out of India and is behind Mu Sigma, which is currently in talks with investors to raise upwards of $200 million in fresh funding which could value the company more than Flipkart. Nevertheless, Fractal, which is backed by TA Associates, has made its own mark in the global markets. Aimia Inc, a Toronto Stock Exchange-listed loyalty management programme firm, is picking a minority stake in the firm for an undisclosed amount. The two firms have also inked a commercial partnership.
Techcircle.in spoke to Srikanth Velamakanni, co-founder and CEO of Fractal, and Vikas Choudhury, COO & CFO of Aimia India, to know more about the partnership, and Fractal’s future plans, competition and more.
Here are the edited excerpts:
Can you take us through the partnership with Aimia? How would the companies benefit from this?
Choudhury (Aimia): We are a provider of loyalty management solutions and currently employ more than 4,000 people in over 20 countries. We offer our clients, partners and members various solutions to launch and manage coalition loyalty programmes.
We own and operate loyalty programmes in countries including Canada, the UK and Italy. AImia also owns stakes in Air Miles Middle East; Mexico’s leading coalition loyalty programme Club Premier; Brazil’s Prismah Fidelidade, and China Rewards that enables members to earn and redeem a common currency.
We together are seeing good synergies and are looking to leverage the clients, expertise and the market access of each other across the globe.
Velamakanni (Fractal): Fractal has been in the market for quite some time. We have been the first player in the analytics space. When we started, no analytics solutions existed. We worked towards the creation of the industry.
Our key strengths include our understanding of the customer behaviorur and the ability to serve them better. Given the kind of reach and scope of Aimia as a loyalty programme company and its access to more than 300 million customers globally, the power of being able to leverage the data is quite unique. Therefore, it is making sense for us to form a strategic move through this partnership.
We want to go to the market jointly and increase analytics usage across the world. We also want to create joint IP (intellectual property).
How large is Aimia’s presence in India? What prompted you to ink a deal with Fractal? How much equity is Aimia picking?
Choudhury: We launched our operations in India four years ago, and are now one of the largest proprietary loyalty management companies in the world. In India, we are working with four large clients, including the Taj Group of Hotels, Tata Capital, Axis Bank and Standard Chartered bank.
We believe that making an equity investment will essentially align with the goals of both companies going forward. Our chief strategy officer Eric Monteiro is joining Fractal’s board.
We believe that the companies will have an unparalleled access to the talent of each other. In addition, Fractal will be able to get access to our onsite global presence, while we will get access to its expertise. Besides, the work culture of both the entities match, and we can leverage each other’s knowledge and clients.
Velamakanni: The most important dimension of this partnership is joint IP creation. It is hard to create joint IP without stronger relationship. So, it makes sense for us to get them as a strategic investor.
Aimia has loyalty business and access to customer data across the world. We are also expanding our presence to Panama, Mexico City, Geneva, China, Australia and Netherlands. Together we can conquer new markets, while leveraging each other’s clients in the existing markets.
We are not at liberty to disclose the transaction details.
How does Aimia address data privacy concerns in the markets it is operating?
Choudhury: We are using data with a lot of discretion. We never misuse customer data; we always ask consumers what they will allow us to do with their data. We analyse and action data, but we never sell data.
Although Mu Sigma was launched four years after Fractal came into existence, it became a much bigger firm. How stiff is the competition between both firms?
Velamakanni: We compete quite well with Mu Sigma. It is a fact that they have more reach in terms of the number of sales people across the world and sector focus. Moreover, Mu Sigma has raised hundreds of millions of dollar ahead of us, and we are four years behind them in terms of raising money.
However, from a competition standpoint our clients win rate is significantly higher. And from a positioning stand point, we pay 30-40 per cent higher salary than Mu Sigma does. In terms of talent, almost 60 per cent our employees are from the premium institutes such as IIMs and IITs.
From a size point of view, we are the second-largest analytics player. Indeed, we want to be the BMW of the analytics world—to be the most respected brand, not necessarily the largest.
In a direct face off with Mu Sigma, we win more often than them. We may win 75 per cent of the deals vis-à-vis Mu sigma (this is a very rough estimate)'
Are you foraying into more verticals?
Velamakanni: We are currently serving clients in financial services, consumer packaged goods (CPG), telecom, insurance and technology. We are now adding lifestyle and health sciences this year. We have just acquired our first life sciences client in the UK.
Our aim is to become a broad-based analytics player serving many industries. We will add these industries gradually.
How do you plan use the money that is coming from Aimia?
Velamakanni: We do have plenty of cash in our balance sheet right now. Being a profitable business and having raised funding from TA Associates, we will use the money for over overall growth. We also want to use some of these proceedings to strategically acquire startups in the space. We are looking for companies with IP or with a good clientele and team.
Are you in talks with any startups for acquisitions yet?
Velamakanni: Yes, we are in talks with over half-a-dozen companies, but we are not in a position to announce anything yet.
Are there Indian firms, too?
Velamakanni: There are all kinds of startups – from India, Asia and the US
Are you looking at raising more funds anytime soon?
Velamakanni: Not right now. In my view, fundraising in general is time consuming and distracting. We don’t want to be a fundraising company - rather we want to be running the company.
Can you share revenue figures?
Velamakanni: We cannot share the exact revenue details. That said, we grow about 50-60 per cent year on year, and are improving our profitability overall.
Mu Sigma is looking to hit IPO in two-three years. Are you nursing similar plans?
Velamakanni: Our current way of thinking is that we want to have the scale and visibility of a public company before hitting the public market. Our immediate goal is to build the company for the next two-three years. A decision to go public or not will be taken at a later stage, because being pubic also comes with its own baggage. We don’t want to take a hasty decision on it.
What is your view on the Indian Big Data market? What per cent of your revenues come from India?
Velamakanni: My understanding is that India has incredibly smart and analytics-oriented people, but it is somewhat low in terms of operational excellence and process maturity. My experience of working with Indian clients is not that good. There is excitement around Big Data, but when it comes to the real use of analytics and getting value out of that, I think India is still a distance away from the rest of the world. The potential is very huge in India, but is a very different market from a price and service point of view.
Our big sweet spots are the US, Europe and Australia.
(Edited by Joby Puthuparampil Johnson)
