WeWork India Management's stock has rallied over 12% since its analyst meet on Tuesday, hitting a new high since its muted listing in October. The management’s optimistic tone appears to have assuaged investors’ concerns.
Amid worries about AI-led disruption to office demand, management argued that India’s talent pool and cost economics would ensure AI drives sustained growth in flexible workspaces through global capability centres (GCCs). Moreover, as businesses increasingly prioritize flexibility in seats and speed to market, flex office penetration in India can increase.
WeWork’s managed-office business now contributes over 25% of revenue, allowing it to retain clients even as they outgrow coworking spaces (shared workspaces typically for small businesses). Managed offices are private workspaces for large businesses, including GCCs, that are maintained and customizable by WeWork.
Expansion plans
It plans to expand the operational area from 8.6 million sq. ft. (msf) to 10.3 msf in FY27, and 11.6 msf thereafter. Meanwhile, occupancy is targeted at 80% or higher, with sustained Grade A presence for premium positioning, ensuring profitable growth. From ₹2,440 crore revenue in FY26, ICICI Securities expects 23% annualized growth by FY28, with faster 29% Ebitda growth on the back of operating leverage as new centres mature.
But slower hiring or GCC expansion would weigh on occupancy and compress margins, with long-term lease costs weighing on margins. WeWork’s ~20% Ebitda margin hinges on healthy occupancy. At FY22’s 60% occupancy, its Ebitda margin used to be -16%.
Growing contribution from managed offices is a double-edged sword. They allow locking in larger, typically stickier clients for longer leases, but remain margin-dilutive while costs are being amortized. This can lead to lower return on capital employed (ROCE).
Competition from peers such as Smartworks, IndiQube, and Awfis could also test pricing power in an increasingly crowded market. Given that the players are at different stages of their debt cycles and profit trajectories, their price-to-earnings multiples are not comparable. On EV/Ebitda, WeWork is the most expensively valued at 6.5x based on consensus Bloomberg FY28 estimates, against 6.4x, 5.5x, and 4.7x for Indiqube, SmartWorks, and Awfis.
Sure, WeWork’s premium over Awfis may be due to the latter’s mass-market presence, which leads to lower profitability. But that over Indiqube and SmartWorks is harder to justify given WeWork’s slower growth at similar margins. Whether its managed workspace bet manages to close the growth gap, will have to be seen.