Awfis is the first Indian coworking service provider heading for an IPO.
The company expects its differentiated business model, expanding presence in tier-1 and 2 cities and growing demand from huge enterprises and startups to assist achieve success in the stock market and drive future growth, founder and managing director Amit Ramani told ET on the sidelines pre-IPO conference in Mumbai.
The company saw operating revenues of Rs 616 crore for the nine months ended December 2023. According to its Red Herring prospectus, in the financial year ended March 31, 2023, operating revenues more than doubled from the previous year to Rs 545 crore .
It is still loss-making. It reported a net loss of Rs 18.9 crore for April-December 2023. In FY23, the net loss narrowed to Rs 46.6 crore from Rs 57.3 crore in FY22.
Ramani said Awfis is currently cash flow positive with earnings before interest and tax (EBIT) of Rs 67 crore.
“The profitability question mark comes when you spend on cash items. In our case, at the EBIT level, we have achieved Rs 67 crore and at the Ebitda level, we have achieved Rs 195 crore for the nine-month period, which is positive,” he said. Through the IPO, Awfis aims to raise Rs. crore of fresh capital. Additionally, Peak XV Partners and the private equity firm ChrysCapital will offer 12.3 million shares for sale. Promoter Peak XV Partners plans to sell up to 6.6 million shares, while unit ChrysCapital Bisque plans to sell 5.6 million shares. The real estate investment fund Link Investment Trust will sell another 85,201 shares.
Post-IPO, Peak XV Partners and ChrysCapital are expected to own 10-11% and 13-14%, respectively, according to the company.
Earlier, Awfis was looking to raise fresh capital worth Rs 160 crore through an offer for sale of 10 million shares.
CFO Ravi Dugar, commenting on the 20% reduction in the up-to-date issue size, said it is necessary to follow the guidelines as promoters are required to hold around 20% of the post-issue capital for the 18-month lock-in period, which has exceeded the size of the previous issue.
Business strategy
Ramani said Awfis’ delivery strategy sets it apart from its competitors because about 66% of its space operates on managed aggregation in partnership with landlords. This approach helps alleviate the capital-intensive nature of the business.
On April 22, ET reported that US coworking company WeWork Inc was exiting its India operations by selling the 27% stake it holds in the local unit in a secondary transaction. Although WeWork’s decision to leave the country comes after it filed for bankruptcy protection in the US in November, India continues to see robust demand for coworking space that began after the pandemic.
Ramani said the Indian coworking market is huge enough for multiple players to thrive, each with their own unique business models.
“We have a leading position and serve the mass market. Every competitor has a different price point at which they sell, and India is an under-commercialized, fast-growing market,” Ramani said.
Change in demand
Changing work dynamics post the Covid-19 pandemic have favored Awfis and similar coworking space providers as Indian companies encourage employees to return to offices, thereby reducing the prevalence of remote work, unlike other markets.
Ramani also noted a shift in demand for coworking spaces, saying that more than 65% of demand now comes from huge enterprises and almost 35% from SMEs and start-ups. This marks a significant change compared to the pre-pandemic period, when less than 50% of demand came from huge companies.
Nearly 46% of Awfis’ business comes from information technology and IT services providers, Ramani added.
Expansion plans
After entering the stock exchange, the company plans to further penetrate first and second category cities. The key tier-2 cities in the expansion strategy include Guwahati, Vijayawada and Lucknow, which takes the number of markets where it is present to 19.
As of December 31, Awfis operated in 16 cities, covering 138 centers with 81,433 seats and a payable area of 4.10 million square feet.
Ramani said there are no current plans to expand internationally.
