Embassy Buildcon LLP, the holding company of WeWork India, is pledging its shares in the co-working firm for a ₹200 crore financing facility from ICICI Bank Ltd, according to a filing with the Registrar of Companies (RoC).
As per the pledge agreement, Embassy Buildcon has agreed to pledge its shares in WeWork India Management Pvt. Ltd, representing 26% of the paid-up equity share capital of the latter, in favour of ICICI Bank.
The We Co., the American firm which operates co-working office spaces under the WeWork brand, posted robust revenue growth in India, even as it reels under massive losses globally, as per the company’s first public regulatory filing, Mint reported on 15 August.
Since its entry in India in 2016 through a partnership with Bengaluru-based real estate firm Embassy Group, WeWork has been aggressively expanding its footprint. At present, it has 23 co-working centres—nine each in Bengaluru and Mumbai, and another five in Gurugram—adding up to 39,000 seats.
A WeWork India spokesperson declined to comment.
“The WeWork spaces, globally, require far greater investment than typical co-working spaces. But, only in India, do WeWork’s local partners have to bear the entire cost of setting up and operating the WeWork locations," said Vivek Durai, founder of business signals platform Paper.vc.
According to a report by Reuters, The We Co. is looking to raise $3-4 billion through an initial public offering (IPO), which is likely to be launched in September this year. New York-based We Co. posted net loss of around $689.7 million and revenue of $1.54 billion in the first six months of 2019.
Unlike other Asian markets such as China and Japan, The We Co. operates on a revenue and profit sharing model with its Indian partner.
“Arbitraging short-term leases with long-term debt is the only way co-working companies can get their centres up and running, if they want a large scale operation. This is a capital-hungry business and you need to invest big money. While occupancy rates in these spaces are in their 60-70% across India at the moment, there are headwinds coming their way, thanks to the global fears of a recession," said Juggy Marwaha, executive managing director, JLL India.
According to property consultant CBRE, leasing quantum of the co-working segment is expected to rise to 10 million sq. ft. by 2020 from 7.1 million sq. ft. in 2018.