BackWeWork share sale may drive growth in co-working sector
The public offer, if it goes alright, will act as a beacon and draw investors to the sector in India, say analystsWe.Co, which operates WeWork, is expected to go for an IPO in Sep and raise up to $3-4 bn
PremiumBENGALURU : Multinational co-working giant WeWork’s coming public listing may drive future funding, valuation and growth in India’s emerging flexible working ecosystem, said investors and operators, amid robust demand for such spaces and their continued expansion.
So far, co-working firms have largely been self-funded, with some external investments, creating nearly 350-400 operators of different sizes offering products at varying price points. The next phase of growth and survival will depend on the capital they raise, operational efficiency and investor confidence.
The We.Co, which operates WeWork, is expected to go for an initial public offering (IPO) sometime in September, and raise $3-4 billion, a Reuters report said.
“...The WeWork public listing, if it goes alright, will act as a beacon that will show the direction and may give more investors confidence to look at the sector. However, there are differences between how the industry will develop in India and the developed countries and mature investors will understand the market in a bottoms-up manner and take a call," said Sandeep Singhal, managing director of investment firm WestBridge Capital India Advisors.
WestBridge, which invested in co-working space provider IndiQube in 2018, remains focused on evaluating investment opportunities in the sector.
Co-working is a capital intensive and economies-of-scale business, which experts believe will give way to a few organized operators backed by institutional capital. Over time, large corporates would also want to deal with a few large co-working operators.
Awfis Space Solutions Ltd founder and chief executive officer (CEO) Amit Ramani said the WeWork IPO will surely have an impact on the co-working industry in India.
“The year 2019 will be crucial for operators in terms of fund-raising, and going forward, there will be 10-12 strong players backed by institutional investors. The IPO’s success will, therefore, give investors confidence here as well," Ramani said.
Awfis is one of the few dominant operators who have raised around $50 million in the last two years, which will help them reach 150,000 desks or seats by 2022, from the current 30,000.
Abhishek Goenka, CEO, CoWrks, which is in the process of raising $50 million to fuel expansion, said the growth in markets like the US is important as it’s typically an indicator of how global corporations are viewing the concept of shared workspaces.
“...India has embraced this concept swiftly and the few serious players such as CoWrks, continue to expand rapidly. WeWork in the US has been a pioneer and we are eagerly awaiting its IPO, as it’ll be an interesting milestone in the further growth and impetus of the sector globally and in India too," Goenka said.
Since WeWork entered India in 2016 through a partnership with Bengaluru-based Embassy Group, it has aggressively expanded its footprint here. The company has claimed robust revenue growth in India, even as it reels under massive losses globally. WeWork in India has been mainly funded by Embassy so far, and is currently planning to raise debt and equity to fund its robust growth plans.
“...New investors may be holding back on fresh investments and taking note ahead of the WeWork IPO, which if it does really well, it will be further validation of the co-working business model and give a boost to investors’ confidence. Even if it doesn’t do well, it will not be a reflection on the entire flexible workspace industry as the fundamentals are strong and companies like us continue to grow in a profitable manner," said Ankit Samdariya, CEO of co-working firm The Hive, which is backed by The Xander Group Inc.
Fund-raising and valuations may be at stake, but large operators are not shying away from scaling up.
Rishi Das, chairman, IndiQube said as more enterprises and MNCs drive demand for co-working spaces, the market is becoming discerning.
“They are looking at stability of the operators, customisation, compliance and safety. While any good IPO will have an impact, the clan of investors in India are evaluating the kind of portfolio an operator has and the returns that can be generated," he said.
International Workplace Group (IWG), which operates under the Regus and Spaces brands, has expanded rapidly in the last few years.
“We are adopting the franchise model here to grow faster and also looking at organic growth and acquisitions. We are opening our newest centre in Noida this month," said IWG country head (India) Harsh Lambah.
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