Private equity giant Apax buys $200 million stake in Indian A.I. firm Fractal, valuing it at $500 million

Fractal Analytics CEO Srikant Velamakanni at Mint's Enterprise Technology Summit on February 26, 2014.

Pradeep Gaur | Mint via Getty Images
Fractal Analytics CEO Srikant Velamakanni at Mint’s Enterprise Technology Summit on February 26, 2014.

Indian artificial intelligence (AI) firm Fractal Analytics said Wednesday it raised $200 million from private equity giant Apax Partners.

The capital was raised through the sale of newly issued shares and existing shares owned by investors including Malaysia’s sovereign wealth fund Khazanah Nasional and U.S. private equity firm TA Associates.

Fractal Analytics, which has offices in New York, London and Mumbai, is now valued at $500 million following the investment, according to a source familiar with the deal who preferred to remain anonymous because the valuation has not been publicly announced.

The transaction sees Apax acquiring a “significant minority stake” in Fractal, the company said. The deal is expected to close by February.

The company is making “about $100 million” in annual revenue, Chief Executive Srikanth Velamakanni told CNBC in an phone interview, and hopes to eventually cross the $1 billion annual revenue mark.

“We wanted to get a partner who could really be more than an investor and that is why we chose Apax,” Velamakanni said of Fractal’s new investor. “They have a good track record and know the space well.”

Fractal, which was founded in 2000, is an enterprise-focused business that helps clients make decisions by using machine-learning algorithms. The company says it’s partnered with multiple Fortune 500 firms.

The firm will use Apax’s investment to fund increased international expansion and mergers and acquisitions, Fractal’s chief said. It wants to build a presence in China, he said, a country that has become a powerhouse in the AI industry.

“We certainly want to expand into larger parts of Europe, Australia and very selective parts of Asia,” Velamakanni said.

Velamakanni said China was a “fascinating destination” and “formidable force” when it comes to AI, pointing to the ease of companies like SenseTime to gain access to government data. Data are a crucial component of machine learning and analytics.