Kotak Institutional Equities has initiated coverage on Smartworks with a Buy rating and a fair value of ₹600, citing strong scale, visibility of expansion, and margin upside. The brokerage views Smartworks as a commercial real estate platform benefiting from hybrid work trends and rising enterprise demand for flexible offices.
Kotak Institutional Equities has initiated coverage on Smartworks Coworking Space with a Buy rating, signalling renewed confidence in India’s flexible workspace sector. Assigning a discounted cash flow-based fair value of ₹600 per share, Kotak sees meaningful upside from the current market price of around ₹506. Importantly, the brokerage positions Smartworks as a commercial real estate play rooted in scale and operating leverage, rather than a traditional coworking operator.
This view reflects a broader shift in how institutional investors assess flexible workspace platforms, as hybrid work, cost efficiency, and managed office demand reshape occupier behaviour across India’s office market.
Scale as the Primary Growth Lever
At the centre of Kotak’s investment thesis is scale. Smartworks is already among India’s largest flexible workspace operators, with 9.1 million sq ft of operational area and a leased footprint exceeding 10.3 million sq ft. The platform is expected to expand rapidly, with total operational area projected to reach nearly 14.5 million sq ft by FY28.
Kotak expects Smartworks to add 2–3 million sq ft annually, supported by steady enterprise demand and improved visibility on new centres. This expansion is critical, as a larger portfolio allows fixed costs to be absorbed more efficiently, improving unit economics over time.
Margins Set to Improve with Operating Leverage
The brokerage forecasts a strong financial ramp-up as scale translates into profitability. Adjusted EBITDA is expected to grow at a 38% compound annual growth rate between FY25 and FY28. Alongside this, EBITDA margins are projected to expand by about 380 basis points, reaching nearly 10% by FY28 as occupancy stabilises and cost structures normalise.
Kotak also expects operating cash flows to exceed EBITDA over the medium term. This is supported by security deposits on new leases and improving centre-level economics as Smartworks reaches critical mass across cities.
Why Flexible Workspaces Matter Again
Flexible workspaces are re-emerging as a major driver of office leasing activity. Kotak highlights that flex operators now account for nearly one-third of incremental leasing in India’s commercial real estate market. Hybrid work models, shorter lease tenures, and a growing preference for managed offices are pushing mid-to-large corporates, multinational companies, and fast-scaling startups toward platforms like Smartworks.
This trend positions large, institutionalised flex operators as long-term beneficiaries of structural changes in how offices are planned and consumed.
Valuation and Key Risks to Watch
On headline multiples, Smartworks may appear expensive, trading at around 16x FY27E EV to adjusted EBITDA, according to Kotak’s estimates. However, the brokerage believes this valuation is justified by strong growth visibility, improving cash flows, and increasing institutional acceptance of the coworking sector.
That said, risks remain. Any sustained drop in occupancy levels (currently about 83%), delays in securing new properties, or a slowdown in overall office absorption could weigh on profitability. Even so, Kotak’s initiation underscores growing confidence that flexible workspaces are evolving into a core segment of India’s commercial real estate market.
