Fractal Analytics, the country’s second-largest pure-play analytics provider, has caught the eye of the world’s largest loyalty management firm, Aimia, which will invest an undisclosed sum for a single-digit stake in the firm as part of a strategic deal.
As per the arrangement, Fractal will help Aimia leverage its repository of customer data, and the two will also go to market jointly and build intellectual property in the area of customer analytics.
The deal is the second such in the analytics space after Mastercard concluded a similar arrangement with MuSigma last year.
Fractal co-founder and CEO Srikanth Velamakanni said there is significant demand for analytics and scarcity of skills is driving up valuations, but declined to comment on the valuation at which its deal with Aimia was done.
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“We are growing both in terms of revenue and profits, and that is making Fractal more valuable,” Velamakanni said.
A person with knowledge of the transaction said the analytics player could be valued at around $250 million. The company expects to close the year with $40-45 million in revenues.
Post-transaction, Aimia’s chief strategy and analytics officer Eric Monteiro will join the Fractal board.
Aimia shortlisted Fractal after a two-year global search during which it evaluated five analytics providers. “We found that Fractal had the best cultural and sectoral fit for us,” said Vikas Choudhury, COO and CFO (India), Aimia Inc.
Last year, Fractal had raised $25 million from Boston-headquartered private equity firm TA Associates.
It derives most of its business from retail, consumer goods and financial services clients and has trademarked solutions such as Customer Genomics, which addresses customer acquisition, loyalty and provides customer segmentation based on multiple parameters.
Aimia, which started as a frequent flier loyalty program by Air Canada, was eventually spun off as an independent entity running and managing several loyalty programs. It’s listed on the Toronto stock exchange, has operations in 20 countries and closed 2013 with gross billings of $2.4 billion. Its Nectar program in the UK reaches around 19 million households. Globally, that figure through various loyalty programs is 300 million.
Experts see huge potential for analytics industry.
“Analytics is moving from standalone project-based revenue to ongoing engagements, which is where the real benefits are,” said Milan Sheth, partner and technology leader at EY India. “The industry is still in its infancy and has the potential to grow 150%-200% over the next 3-4 years,” he added.
The use of analytics could help companies maximise profits and improve return on investment. For instance, if customer insights show Bali is one of the locations a passenger is considering for a vacation and a flight to Bali has a large inventory of empty seats, a targeted promotion can help the passenger redeem his miles and book on the flight, thus saving the airline inventory which may have otherwise gone waste and which may have otherwise been redeemed on a full flight.
Palantir, one of the largest analytics firm (not counting business intelligence players like SAS) by revenue, is valued at $9 billion, in an indication of the growing importance of analytics.
Source: Economic Times