Smartworks Coworking Spaces IPO Subscribed 0.52x on Day 1: Should You Subscribe?

About the Issue:

Smartworks Coworking Spaces Ltd has launched its Initial Public Offering (IPO) to raise Rs 582.56 crore. The IPO opened for subscription on Thursday, July 10, 2025, and will close on Monday, July 14, 2025. The price band is set at Rs 387–Rs 407 per share, and investors can apply for a minimum lot of 36 shares and in multiples thereof.

The issue comprises a fresh issue of 1.09 crore shares aggregating to Rs 445 crore and an offer for sale (OFS) of 33.79 lakh shares aggregating to Rs 137.56 crore. The company has revised its IPO size downward from its earlier plans, with reductions in both the fresh issue and OFS components.

Ahead of the launch, Rs 173.6 crore was raised from 12 institutional investors via the anchor book on July 9. Key participants included Tata Mutual Fund, Axis New Opportunities AIF, Aditya Birla Sun Life Insurance, Baroda BNP Paribas MF, SBI General Insurance, and BNP Paribas, among others.

The IPO also includes a reservation of 1,01,351 shares for employees, offered at a discount of Rs 37 per share.

Post-issue, the implied market capitalisation is estimated between Rs 4,394 crore and Rs 4,645 crore. Promoter and investor Keppel Land has reduced its OFS portion by half and will retain a 15 per cent stake, down from 19 per cent. Notable existing investors include the family offices of Ananta Capital, Hexaware, Enam Group, and Deutsche Bank. Madhu Kela was an early angel investor in the company (2017).

The IPO allotment is expected to be finalised on July 15, with listing scheduled on BSE and NSE on July 17, 2025. JM Financial is the book-running lead manager, and MUFG Intime India (Link Intime) is the registrar to the issue.

See details below:

Objects of the Issue and Promoter Details

The net proceeds from the fresh issue will be used primarily for three objectives:

• Rs 114 crore for repayment or prepayment of existing borrowings, reducing the company’s debt burden
• Rs 226 crore for capital expenditure related to fit-outs and security deposits for new coworking centres
• The remainder (up to 25 per cent) for general corporate purposes to enhance operational flexibility.

The IPO also aims to elevate Smartworks’ brand visibility and reputation among clients, while facilitating a transparent and liquid public market for its shares.

Promoters include Neetish Sarda, Harsh Binani, Saumya Binani, along with NS Niketan LLP, SNS Infrareality LLP, and Aryadeep Realstates Pvt Ltd. Post-IPO, promoter shareholding will decrease from 65 per cent to 59 per cent, encouraging wider public ownership.

Company Profile

Smartworks Coworking Spaces Limited is India’s largest managed campus operator by total stock as of March 31, 2024, with a lease-signed portfolio of 8 million square feet and a total managed area of 8.99 million square feet by March 31, 2025. The company provides customised, tech-enabled managed workspace solutions catering to enterprises of all sizes, particularly mid- to large-sized corporates requiring over 300 seats. By transforming bare-shell properties into fully serviced office campuses, Smartworks delivers an enhanced office experience with value-centric pricing, aesthetic design, and amenities such as cafeterias, gyms, sports zones, and medical centres. With a presence across key business hubs like Bengaluru, MMR, Hyderabad, Gurugram, and Chennai, the company addresses the growing demand for flexible and productive workspaces.

Focused on scalability and operational efficiency, Smartworks added 2.83 million sq. ft. of space under management between FY23 and FY25, achieving a healthy CAGR of 20.80 per cent. The company’s adjusted EBITDA grew more than 3.5x during this period from Rs 36 crore in FY23 to Rs 172 crore in FY25, reflecting strong operational leverage. As of FY25, the company’s net debt stands at around Rs 300 crore. Backed by robust expansion, deep enterprise engagement, and a differentiated service-led model, Smartworks continues to position itself as a modern, tech-first alternative to traditional office spaces in India.

Industry Outlook 

India’s commercial office market is set to grow from 883 million sq. ft. in Q1 CY2025 to 1,072 million sq. ft. by 2027. Within this, the flexible workspace segment is projected to expand at a CAGR of 18–20 per cent, with Tier 1 cities seeing growth from 82–86 million sq. ft. to 140–144 million sq. ft.

CBRE’s 2024 India Office Occupier Survey notes that 59 per cent of companies will allocate more than 10 per cent of office space to flexible models by 2026. Demand drivers include the return-to-office trend, the rise of Global Capability Centres (GCCs), and cost-conscious occupiers.

That said, risks include lease cost escalation, macroeconomic volatility, and overcapacity in some locations.

Financials 

Smartworks Coworking Spaces Limited – Financial Performance

(Source – Company’s RHP)

Balance Sheet Snapshot

(Source – Company’s RHP)

Key Metrics

(Source – Company’s RHP)

Key ratios

(Source – Company’s RHP)

Despite reporting net losses, Smartworks has demonstrated strong operational performance, as reflected in its consistently positive EBITDA and robust EBITDA margins over FY23–FY25. However, this operational profitability has not translated into net profits primarily due to high depreciation and finance costs. Depreciation, driven by heavy investment in workspace fit-outs, stood at Rs 635.99 crore in FY25, while finance costs, owing to lease liabilities and borrowings, amounted to Rs 336.34 crore. To move toward profitability, Smartworks is expanding margin-accretive streams such as Fit-out-as-a-Service (FaaS), which contributed Rs 34.70 crore in FY25, and other value-added services. It is also shifting to capital-efficient models like management contracts and variable rentals to reduce risk. The company’s strong client retention rate of 86.83 per cent and a shorter-than-industry average payback period of 30–32 months for mature centres reflect sound capital efficiency.

Additionally, Smartworks is leveraging technology and automation to improve space utilization and reduce per-seat costs. Its focus on enterprise clients ensures long-term contracts, providing greater revenue visibility and stability. Strategic location selection based on demand analytics is also helping optimize occupancy and margins. However, fixed lease obligations and ramp-up risk in new centres remain key challenges to achieving consistent profitability.

Listed Peer Comparison 

SWOT Analysis

Strengths
Smartworks is India’s largest managed campus operator with a lease-signed portfolio of nearly 9 million sq. ft. across 50 centres (FY25). Its early mover advantage, enterprise-focused model (300+ seat clients), and strong client retention rate of 86.83 per cent provide competitive edge and revenue visibility. Operationally, it delivers high EBITDA margins (62.39 per cent) and strong RoCE (42.30 per cent), with mature centres breaking even faster than industry averages (30–32 months). In-house design and tech platforms like BuildX enable rapid fit-outs in 45–60 days. Strategic backing from Keppel Ltd. and a strong brand further enhances its market positioning.

Weaknesses
Despite operational strength, Smartworks posted a net loss of Rs 631.79 crore in FY25 due to high depreciation and finance costs. Return on Net Worth remains negative (–58.76 per cent), and the company faces a significant working capital deficit of ₹9,613.65 crore. Its revenue is geographically concentrated in four cities, increasing exposure to regional demand shocks. The fixed-lease model adds financial strain during periods of low occupancy. Delays in centre ramp-up and ongoing regulatory scrutiny also pose operational and reputational risks.

Opportunities
India’s flexible workspace market is poised to reach 280–300 million sq. ft. by FY27, driven by growing adoption of “Core + Flex” strategies. Smartworks is well-positioned to tap into this demand with its national presence and enterprise-first approach. It is also diversifying into high-margin services like Fit-out-as-a-Service (FaaS) and exploring capital-light models (e.g., management contracts, variable rentals), which could enhance scalability and capital efficiency. ESG initiatives like captive solar projects may further boost its appeal among large corporates.

Threats
Intensifying competition from players like WeWork India, Awfis, and IndiQube may lead to pricing pressure and margin compression. Market saturation in Tier 1 cities and macroeconomic risks such as rising rates or slowdowns in IT/start-up sectors could dampen demand. Short- to medium-term client contracts heighten renewal risk, while regulatory issues and litigations pose compliance and brand credibility concerns, especially ahead of its IPO.

Outlook and ValuationBottom of Form

Smartworks has emerged as a leading player in India’s managed office and premium workspace segment, with a strong enterprise focus. Over eight years, it has built a robust brand, serving over 800 clients—including Google IT Services and L&T Technology Services—with a high seat retention rate of 87% in FY25. Its asset-light, scalable model ensures operational flexibility, while strong forward bookings, low receivable days (five in FY25), and high client stickiness reflect business resilience.

Despite healthy gross-level cash EBITDA, Smartworks remains net loss-making due to high depreciation and finance costs linked to capital expenditure and lease obligations. The IPO (₹445 crore fresh issue and ₹138 crore OFS) aims to reduce debt, fund expansion, and support working capital—key to improving liquidity and leverage. Structurally, cash flows are de-risked by advance rental collections, easing working capital pressures.

At the upper price band of Rs 407, Smartworks is valued at an EV/EBITDA of 9.34x, below listed peer Awfis’s 12.9x. On a P/S basis, it trades at 3.3x versus Awfis’s 3.7x. Though not yet profitable and thus not valued on a P/E basis, the pricing seems fully priced, supported by strong revenue growth, high RoCE, and operating efficiency. Key risks include high leverage, continued net losses, and geographic concentration (75 per cent of revenue from four cities). Future growth will require sustained client acquisition and margin discipline amid rising competition.

India’s commercial office market is expected to grow at a 6.7 per cent CAGR till 2027, aided by hybrid work models and increasing adoption of managed campuses. Smartworks is well-positioned to capitalise on this trend, but long-term success depends on improving profitability, rationalising debt, and maintaining high occupancy.

Recommendation:
Given the company's leadership position, differentiated enterprise-focused model, and improving financial efficiency, the IPO offers potential for long-term value creation. However, considering the current net losses, high leverage, and execution risks, we recommend a “Subscribe for Long Term” only for risk-tolerant investors. Those seeking short-term listing gains may tread cautiously, while conservative investors may prefer to wait for improved earnings visibility post-listing.