
WeWork India IPO: A game-changer or just a cash-out?

Summary
- WeWork India’s IPO marks a pivotal moment for the country’s flexible workspace sector. With a pure offer-for-sale structure and no fresh capital infusion, will investors back its growth story or see it as a promoter exit?
Bengaluru-based WeWork India has officially set the stage for its public market debut, filing its draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (Sebi). The move signals a significant milestone for one of the country’s leading flexible workspace providers as it prepares to test investor sentiment in a rapidly evolving commercial real estate sector.
The offer-for-sale route
Unlike many IPOs that inject fresh capital into a business, WeWork India’s offering will be a pure offer-for-sale (OFS) of 43.75 million shares. This means that existing shareholders, including promoters Embassy Buildcon LLP and 1 Ariel Way Tenant Ltd, will be offloading their stakes without any new capital flowing into the company itself. Embassy Buildcon LLP is set to sell up to 33.4 million shares, while 1 Ariel Way Tenant Ltd will offload 10.2 million shares.
While the DRHP does not specify the IPO’s total valuation, reports suggest that WeWork India’s public offering will allow its promoters to monetize their stakes at a strategic juncture in the industry’s growth cycle. The listing will also offer retail and institutional investors a chance to own a slice of one of India's leading flexible workspace companies.
Path to profitability
WeWork India’s financials paint a picture of a gradual recovery from pandemic-driven downturns. For the first half of FY 2024-25, the company reported a net profit of ₹174.13 crore, a stark contrast to the net loss of ₹135.83 crore in FY2023-24. This marks a significant turnaround from the hefty ₹642.99 crore loss in FY2021-22. Total income for the six months ended September 2024 stood at ₹960.76 crore, reinforcing its growing financial resilience.
WeWork India’s revenue for FY2023-24 soared by 27% year-on-year to ₹1,665.14 crore, an improvement that played a role in credit rating agency ICRA upgrading the company's credit rating. The firm has also been working aggressively to cut debt, raising ₹500 crore through a rights issue earlier this year, primarily to redeem non-convertible debentures and strengthen its balance sheet.
"Over the past eight years, we have been focused on long-term, sustainable growth. With the recent successful completion of our rights issue, we are on the path to being debt-free. This underscores the trust and confidence our investors/shareholders have in our vision and strategy in India," said Karan Virwani, MD & CEO of WeWork India, in an official company statement announcing the rights issue.
While its revenues and profitability have shown marked improvement, the company still faces operational costs, competitive pricing pressures, and potential lease obligations that could impact its bottom line. Investors will keenly watch how the company sustains profitability in the long run.
Global parent’s woes
The IPO filing comes at a time when WeWork Global, its US-based parent, has been grappling with bankruptcy following a period of overexpansion and financial mismanagement. However, WeWork India has consistently maintained that it operates as an independent entity, shielded from the turbulence affecting its global counterpart. The Indian franchise, backed by real estate giant Embassy Group, has emphasized that its business model, market demand, and operational efficiency distinguish it from WeWork Inc.’s struggles.
Interestingly, WeWork Global’s earlier plan to exit its Indian joint venture by selling its 27% stake was stalled due to a valuation mismatch. With the public listing now in the works, it remains to be seen how the ownership structure evolves post-IPO. Analysts speculate that post-IPO, Embassy Group may look to consolidate its stake further, ensuring long-term stability and decision-making control.
Also Read: Will the collapse of WeWork impact co-working in India?
Riding the flexible workspace boom
India’s co-working and flexible office space sector is witnessing a dramatic shift. With enterprises embracing hybrid work models and startups seeking cost-effective office solutions, the demand for flexible workspaces is soaring. According to real estate consultancy CBRE, the country’s flexible workspace market, currently at 55 million sq. ft, is expected to expand to between 100-140 million sq. ft by 2030.
WeWork India leads the market in terms of revenue, with a portfolio spanning 94,440 desks across 59 centres in major cities, including Bengaluru, Mumbai, Delhi-NCR, Pune, Hyderabad, and Chennai. Its client roster features marquee names such as Amazon Web Services, JP Morgan, Deutsche Telekom, and Grant Thornton Bharat, further reinforcing its strong positioning in the segment.
Moreover, the company is actively expanding its footprint. Recently, it leased over 175,000 sq. ft of office space in Bengaluru and Pune to cater to growing demand. This expansion strategy could further bolster investor confidence by showcasing long-term growth potential.
Also Read: IPOs by flexible workspace firms: Sharing to grow
Competition and risks
The Indian flexible workspace market has grown increasingly competitive, with Awfis Space Solutions, Smartworks, and IndiQube offering alternative solutions. Awfis, which went public in May 2024, saw its stock oversubscribed 108 times, signalling strong investor interest in the sector. WeWork India’s IPO will serve as a litmus test to gauge whether the enthusiasm for co-working IPOs sustains or fades.
When comparing operational metrics as of FY24, WeWork India operated 93,786 seats across 53 centers with a leasable area of 6.56 million sq. ft.
Smartworks, on the other hand, had a higher seat capacity of 1,82,228 across 41 centers and a leasable area of 8.00 million sq. ft, while Awfis managed 1,10,540 seats across 181 centers with 5.6 million sq. ft of leasable space. IndiQube, a growing competitor, operated 1,18,530 seats across 85 centers with a leasable area of 5.52 million sq. ft.
In terms of revenue, WeWork India led with an annual revenue of ₹1,737.16 crores for fiscal year 2024, followed by Smartworks at ₹1,113.11 crores. Adjusted Ebitda also placed WeWork India ahead with ₹339.75 crore, significantly higher than Smartworks’ ₹106.03 crore and Awfis’ ₹97 crore. IndiQube stood at ₹113.3 crore.
Despite its lead in revenue and Ebitda, WeWork India faces challenges. Its occupancy rate for FY24 for mature centres (85.55%) was slightly behind competitors such as Smartworks (86.77%) and IndiQube (90.06%).
However, challenges remain. While WeWork India has managed to trim losses, its net worth as of September 2024 stood at a negative ₹259.88 crore. Furthermore, since the IPO is purely an OFS, the proceeds won’t be utilized for expansion or strengthening the company’s financial standing, raising concerns for growth-focused investors.
Additionally, with a growing number of competitors offering differentiated pricing models and customized office solutions, WeWork India will need to ensure that it maintains its premium positioning while managing costs effectively.
Also Read: WeWork, Simpliwork, Table Space firm up IPO plans on investor interest in coworking companies
Will WeWork India’s stock be a hit?
The public market response to WeWork India’s IPO will be keenly watched, especially considering the broader macroeconomic factors impacting commercial real estate. The company’s focus on Grade A properties (accounting for 93% of its portfolio) and its strategic presence in Tier-1 cities could work in its favour.
On the flip side, investors may tread cautiously, given the lack of fresh capital infusion and uncertainties surrounding long-term profitability. WeWork India’s ability to sustain profitability, maintain occupancy levels, and differentiate itself from the troubled WeWork Inc. will be critical in determining the IPO’s success.
Furthermore, investor sentiment will likely be influenced by recent market trends. If the broader stock market remains favourable and the appetite for commercial real estate investments continues to grow, WeWork India may see strong demand. Conversely, any macroeconomic downturns or rising interest rates could pose challenges.
A pivotal moment for India’s flexible workspace giant
WeWork India’s IPO is poised to be a landmark event in the country’s co-working sector. As the company steps into the public domain, its ability to balance growth ambitions with financial stability will be crucial. If the offering garners strong investor interest, it could pave the way for more flexible workspace operators to explore the public markets.
Whether WeWork India’s IPO turns into a runaway success or faces headwinds remains to be seen, but one thing is certain—the flexible workspace revolution in India is here to stay, and WeWork India is at its forefront. The upcoming months will be pivotal in shaping the company’s trajectory as it navigates the complexities of the stock market while continuing to cement its leadership in the sector.
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Note: The objective of this article is to share insightful charts, data points, and thought-provoking opinions. It is NOT a recommendation to buy or sell any stocks. If you are considering an investment, please consult a professional financial advisor. This article is intended solely for educational purposes.
Suchitra Mandal is a financial writer with expertise in delivering well-researched insights and detailed analyses of companies' performance and market trends.
Views are personal and do not represent the stand of this publication.