Companies
Mint Explainer: Will WeWork’s troubles affect India ops?
Summary
- While the India affiliate works as an independent entity, it did receive support at the peak of covid in 2020, when WeWork invested $100 million in it
New York-headquartered WeWork Inc recently cautioned that it may be unable to remain in business thanks to financial losses and increased member churn amid prolonged weakness in the commercial real estate market. While this is not the first time the global provider of shared working spaces has signaled uncertainty, it has led to obvious questions about the impact on its Indian affiliate. Will WeWork’s troubles affect WeWork India’s growth plans?
WeWork vs WeWork India
Six years since its launch, WeWork India, in which WeWork Inc owns about 27%, has been one of the company’s fastest growing affiliates outside the US. The remaining 73% is owned by an entity of Embassy Group, one of the country's top office developers. Despite the troubles of the parent entity, including co-founder Adam Neumann’s unceremonious exit, its turbulent stock market listing and investor concerns about governance, WeWork India has continued to expand in a measured way. While the India affiliate works as an independent entity, it received support at the peak of covid in 2020, when WeWork invested $100 million in it.
Will WeWork India be affected?
Analysts said the liquidity issues of WeWork in the US, where 40-45% of its business comes from, may make it hard for the company to offer financial support in the short to medium term to its affiliates in other countries, including India. WeWork India, however, has no immediate plans to raise funds after mopping up ₹550 crore from BPEA Credit, a private credit platform, last December.
WeWork India chief executive Karan Virwani said WeWork continues to be a category-defining brand. The recent news of WeWork globally did stir up questions among tenants and members in India, but Virwani said the management has explained to them that business in the country will continue as usual. “People know we are a separate entity, and we want to build on that. But the brand carries tremendous value and matters even today," he added.
How has WeWork India fared so far?
Even as profitability remains elusive for WeWork Inc, WeWork India clocked revenues of ₹1,400 crore in 2022-23 and EBITDA of ₹250 crore. EBITDA is earnings before interest, taxes, depreciation, and amortization. Amid speculation that WeWork will file for bankruptcy in the US, Virwani said the April-June quarter of FY24 has seen big growth in WeWork India’s revenue, with sales of 12,000 desks across cities. It has added 14,000 desks since April and is present in seven cities. Its portfolio comprises 90,000 desks and 70,000 members.
The company, which saw a slowdown before and during the pandemic as it focused on turning profitable, has returned to the growth track in the past two years. However, it plans to continue operating in the top cities and has not ventured into tier-2 markets like some of its peers. WeWork India, which opened its 50th workspace in Delhi’s Eldeco Centre, with 700 desks and 54,000 sq ft of space, remains one of the largest operators in the flexible workspace sector.
The future of WeWork and co-working in India
India’s flexible workspace market is expected to hit 126 million sq ft by 2027 from the current 46.7 million sq ft, at a compound annual growth rate (CAGR) of 22%, according to a May report by IndiQube-CRE Matrix. The demand for flexible workspaces, particularly since the pandemic, has caused a shift towards remote and hybrid working.
An array of digital products that WeWork India introduced during covid to bring members back, has seen good demand and continues to grow. For instance, the on-demand pass, which did about ₹20 crore of sales last year, is expected to double this year. It offers day passes, hot desks, dedicated desks, ready-to-move-in private offices, managed offices and virtual offices. It plans to add roughly 20,000 desks every year to address the demand for both flexible and managed workspaces.
The flexible workspace industry has been seeing consolidation since 2019. WeWork India’s rivals include Table Space, Smartworks, IndiQube, Awfis, Simpliwork Offices and CoWrks. However, Virwani said while most operators are focused on enterprise managed solutions, WeWork India will stick to its policy of offering space to both companies and individuals on a co-working and managed office-led model.
