WeWork India IPO: Weak profits, strong cash flows—should you buy at a premium?

The company is now set to launch its initial public offering (IPO) on 3 October. Priced at ₹615-648 per share, the ₹3,000 crore issue (at the upper price band) is a pure offer-for-sale of 46.3 million shares: Embassy Group will offload 35.4 million, and 1 Ariel Way Tenant will sell 10.9 million. Post-IPO, their stakes will fall to 48.1% and 14.8%, respectively.

Since no fresh issue is being raised, the company itself will not receive any funds for growth, which could act as a dampener for some investors. Even so, at the upper end of the price band, WeWork India's market capitalization is pegged at ₹8,686 crore.

The critical question for investors: How is the company positioned, and does the IPO offer value?

Embassy’s backing sets WeWork apart

Embassy Group’s support makes WeWork India one of the strongest players in the country’s co-working space. A leading developer with over 85 million square feet under management, Embassy also sponsors Embassy Office Parks, Asia’s largest office Real Estate Investment Trusts (Reit) by leasable area. This gives WeWork India preferential access to marquee buildings.

As of 30 June, Embassy (including Embassy Reit) leased 1.36 million square feet (msf) out of WeWork India’s 7.35 msf operational area, about 20%, across 12 of 60 operational centres. The company also leases from prominent landlords such as Prestige, DLF, K Raheja Corp, and Oberoi Realty; its top 10 landlords account for 34.3% of operational area.

Lease model strength

On an average, WeWork India signs leases that last for about 8.5 years, and this duration has remained consistent over the past few years. Most contracts also come with a lock-in period of about four years, which means landlords cannot simply walk away midway. Additionally, the rents aren't fixed forever—they increase by 12-15% every three years. This gives WeWork India revenue visibility, stable occupancy, and a natural hedge against rising costs.

Like other players in the segment, WeWork India works on two main types of agreements with landlords: the dominant straight lease business model and the operator model. The company primarily follows the straight lease model, where it leases bare-shell properties from landlords on a long-term, fixed-cost basis and undertakes fit-outs. All the 60 centres operate under this model.

City concentration

Under the operator model, the company manages and maintains centres on behalf of landlords. However, this contributes only marginally, with WeWork India operating three centres under this model. The company's portfolio stands at 121,700 desks, with 114,100 operational, nearly double the 57,400 desks it had in March 2020.

These desks are strategically diversified across eight cities, across India's largest office markets. Bengaluru, which accounts for about 30% of the country's total flexible workspace stock, contributes the largest share, with 41.2% of WeWork India's desks. It is followed by Mumbai (15.5%), Pune (13.1%), Gurugram (10.3%), Hyderabad (8.5%), Chennai (7.5%), Noida (3.2%), and Delhi (0.7%).

In line with its geographical presence, nearly 61% of its revenue comes from Bengaluru (40%) and Mumbai (21%), pointing to a high revenue concentration in these two cities.

Occupancy and clients: Mixed signals

WeWork India's operating performance shows a mixed picture in recent years. Occupancy at operational centres has eased to 76.5% in Q1FY26, down from 83.8% in FY23, while mature centres, which reflect steady-state performance, moderated to 81.2% from 88.2% over the same period.

The client base has also declined from 2,315 in FY23 to 2,215 in Q1FY26. In line with this, renewal rates, which capture stickiness, have also softened, declining from 79.2% FY23 to around 70%. Yet, memberships have grown from 59,385 in FY23 to 81,706, suggesting that while fewer clients are being retained, larger enterprise accounts are expanding their footprint.

The average revenue per member (ARPM) has remained relatively steady, hovering near ₹19,000, reflecting a degree of pricing stability despite occupancy pressures.

However, it has also largely stayed flat after an 11% increase in FY24. Overall, the portfolio has achieved scale and pricing stability, but falling occupancy and customer retention trends highlight areas that require further close monitoring.

Brand recall and enterprise clients strengthen economics

WeWork India maintains an industry-leading revenue-to-rent multiple of 2.4-2.6x, underscoring strong unit economics even amid occupancy softness. Strong brand recall—four times higher than the closest competitor in search volumes between October 2023 and December 2024—supports premium positioning.

Its premium positioning also stems from a large base of enterprise members. WeWork boasts 87,247 members, comprising enterprise customers such as JP Morgan, Amazon, Uber, Dyson, Khaitan & Company, Warner Bros., and Cushman Wakefield.

They contributed 86.5% ( ₹1,687 crore) to its revenue of ₹1,949 crore in FY25. Of this, enterprise customers accounted for 76.5%, while non-enterprise customers contributed the remaining 23.5% ( ₹397 crore).

As of 30 June, these enterprises had remained with WeWork for an average of about 31 months. Notably, about 44.3% of members occupy more than 300 seats, 19.8% occupy between 101 and 300 seats, and 11.7% fall within the 51–100 seat bracket. This concentration of large-seat customers provides WeWork with stability and visibility, as enterprises are less likely to churn quickly and often expand their footprint over time.

The company has been retaining its existing customer base well, with new business from existing clients rising to 55.8% in FY25, from 34.5% in FY23. Consequently, the contribution of membership fees to the revenue mix has increased from 58.7% in FY23 to 86.5% in FY25. Value-added services, including parking, meeting rooms, and food and beverages, contribute another 11.1% to revenues, a share that has remained largely unchanged.

The member base is also well-diversified, with no single client accounting for over 10% of net membership fees. Its top client contributes 8.3% of the fees, while the top 10 together account for 24%, highlighting a reasonably stable client concentration profile.

Profitability and cash flows

Revenue from operations rose 48% to ₹1,949 crore in FY25 from ₹1,315 crore in FY23, led entirely by membership revenue, which grew 50% to ₹1,660 crore from ₹1,109 crore. However, the pace of growth has been slower than its closest competitor, Awfis, which doubled its revenue over the same period.

Of the total revenue, WeWork paid 43% as rentals in FY25, down from 47% in FY23, showing improving efficiency. The company reported a profit after tax of ₹128 crore, but this was entirely driven by a deferred tax credit of ₹285 crore. On profit before tax levels, losses widened to 155 crore, from ₹147 crore in FY23. This is primarily due to the heavy depreciation costs associated with this asset-intensive model.

Encouragingly, operating performance has been much stronger. Ebitda rose from ₹796 crore to ₹1,236 crore in FY25, with margins expanding to 63.4% — significantly ahead of Awfis at 33.3%. This strength is also evident in cash generation, with net cash from operating activities improving from ₹942 crore to ₹1,290 crore in FY25, indicating that while accounting profitability remains elusive, the cash flow profile is becoming structurally stronger.

Importantly, WeWork has much more money committed from clients than it owes to landlords: its ‘locked-in customer fees’ are 2.4x its ‘locked-in rent’. In other words, even if every client were to walk away today, the fees still contractually owed to WeWork would be 2.4 times the rent it must pay over the same period— offering strong visibility and a cushion against downside risk.

That said, risks persist, including pending tax proceedings of ₹160 crore and other litigation amounting to ₹175 crore.

Can rising demand justify the premium?

At ₹1,949 crore revenue from operations, the company's IPO is priced at about 4.5x market cap-to-sales, which is in line with Smartworks Coworking Spaces (4.7) and Indiqube Spaces (4.6), but at a premium to Awfis (3.2). This suggests that the IPO is fully priced, leaving little room for investors to gain on listing.

For more such analysis, read Profit Pulse.

However, the company could be closely tracked as it stands to benefit from the growing demand for flexible workspace solutions in India, with stock across tier-1 cities expected to expand to 140-144 million sq. ft by 2027 at an 18-20% CAGR.

Madhvendra has over seven years of experience in equity markets and writes detailed research articles on listed Indian companies, sectoral trends, and macroeconomic developments.

The writer does not hold the stocks discussed in this article.

The purpose of this article is only to share interesting charts, data points, and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educational purposes only.