Firm will raise funds via combination of equity, structured debt
WeWork India, which operates around 45,000 desks across cities, leased 10,000 desks in the September quarter alone
Bengaluru: WeWork India, the Indian affiliate of New York-based co-working startup We Co, plans to raise $200 million to fund its growth as demand soars for shared workspaces in the country.
The company, which raised around ₹500 crore of debt recently, will raise the fresh funds through a combination of equity and structured debt, top company executives said. The fund-raising in India comes after its parent postponed a much-awaited initial public offering (IPO) in September, followed by the replacement of its co-founder Adam Neumann by two co-chief executives.
“...It’s business as usual for WeWork India. Whatever has happened doesn’t impact the India business and we continue to believe in the brand. We have been building the business ourselves and co-working has helped our traditional commercial office business a lot," said Jitu Virwani, chairman of Embassy Group on Thursday. Embassy Buildcon Llp is the holding company of WeWork India, that is owned by Virwani.
The delay of WeWork’s global IPO could only result in one hiccup, which would be to establish the valuation of the Indian affiliate when it is out to raise funds, Virwani said. WeWork India was in talks to raise around $100 million this year from a private investor, but the deal didn’t go through.
Separately, Embassy Group, which has several large office parks, plans to raise ₹4,000 crore by divesting certain assets to institutional investors. If WeWork India’s fund-raising doesn’t work out as planned, Embassy may also pump some capital into its co-working business on its own.
“We plan to raise around ₹4,000 crore to primarily pare debt and also keep a cash reserve for the company. We are in talks with a couple of foreign investors and may also form an investment platform with one of them," Virwani said.
Embassy Property Developments Pvt. Ltd, part of Embassy Group, has around ₹7,000 crore of debt, with a large exposure to HDFC Ltd and another bank. Some of the funds may be used to reduce the debt.
Real estate firm Embassy and its long-time investment partner Blackstone Group Lp launched Embassy Office Parks, the country’s first real estate investment trust or REIT earlier this year.
Karan Virwani, CWeO, WeWork India, said the focus has been to grow the business profitably. The firm, which operates around 45,000 desks across cities, leased 10,000 desks in the September quarter alone.
It aims to reach the 100,000-desk milestone by 2020-end. Co-working firms in India have largely been self-funded with some external investments creating 350-400 operators of different sizes offering products at varying price points in India.
The sector’s next phase of growth and survival will depend on the capital they raise, operational efficiency and investor confidence.
Earlier this year, We Co. offered to buy a 70% stake in WeWork India in a cash-and-stock deal valued at $2.75 billion, three years after it entered the country through a brand franchise agreement. With the IPO being indefinitely postponed, it is unlikely that a fresh offer will be made anytime soon.
Unlike other Asian markets such as China and Japan, We Co. operates on a revenue and profit-sharing model with its Indian partner.
At present, WeWork India centres are profitable on an individual basis, but it is yet to turn profitable at the company level, which the Virwanis said will happen next year.