Bengaluru-based WeWork India has officially filed its draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI), marking a significant step toward its stock market debut. As one of India’s leading flexible workspace providers, the company’s public listing will be a key test of investor confidence in the rapidly evolving co-working and commercial real estate sector.

An Offer-for-Sale, Not a Capital Infusion

Unlike many initial public offerings (IPOs) that raise fresh capital, WeWork India’s IPO will be a pure offer-for-sale (OFS). The company’s promoters, Embassy Buildcon LLP and 1 Ariel Way Tenant Ltd will offload 43.75 million shares, meaning no new funds will be injected into the business. Embassy Buildcon is set to sell 33.4 million shares, while 1 Ariel Way Tenant Ltd will offload 10.2 million shares.

While the DRHP does not disclose the total valuation of the offering, industry reports suggest that the IPO will help monetise promoter stakes when the industry is experiencing strong demand. This also allows retail and institutional investors to own a stake in one of India’s most recognised co-working brands.

A Financial Turnaround Story

WeWork India has demonstrated significant financial recovery from its pandemic-induced setbacks. In the first half of FY 2024-25, the company posted a net profit of ₹174.13 crore, a sharp contrast to the ₹135.83 crore net loss in FY 2023-24. This marks a significant improvement from the ₹642.99 crore loss in FY 2021-22. The company’s total income for the six months ending September 2024 stood at ₹960.76 crore, reinforcing its improving financial position.

Additionally, FY 2023-24 revenue rose 27% year-on-year to ₹1,665.14 crore, prompting credit rating agency ICRA to upgrade WeWork India’s credit rating. The company raised ₹500 crore through a rights issue to strengthen its balance sheet, using the proceeds to repay debts.

“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,” said Karan Virwani, MD & CEO of WeWork India, highlighting the company’s strategic shift toward profitability.

Despite this progress, challenges remain. The company still faces high operational costs, competitive pricing pressures, and lease obligations that could impact long-term profitability.

A Different Story from WeWork Global

WeWork India’s IPO comes when its US-based parent, WeWork Inc., has been struggling with bankruptcy due to overexpansion and financial mismanagement. However, WeWork India has consistently emphasised its independence, distancing itself from the parent company’s woes. Backed by real estate giant Embassy Group, WeWork India has a distinct business model, strong market demand, and operational efficiency that set it apart.

Interestingly, WeWork Global previously attempted to exit the Indian joint venture by selling its 27% stake, but the deal was stalled due to valuation mismatches. With the IPO in progress, analysts speculate that Embassy Group may consolidate its stake, ensuring greater long-term control over the business.

Riding the Flexible Workspace Boom

India’s flexible office space market is experiencing unprecedented growth, driven by hybrid work adoption and cost-conscious enterprises. According to real estate consultancy CBRE, the current 55 million sq. ft flexible workspace market is projected to expand to 100-140 million sq. ft by 2030.

WeWork India leads the market in revenue, boasting 94,440 desks across 59 centres in key cities such as Bengaluru, Mumbai, Delhi-NCR, Pune, Hyderabad, and Chennai. Its clientele includes major corporations such as Amazon Web Services, JP Morgan, Deutsche Telekom, and Grant Thornton Bharat.

In line with growing demand, the company has expanded its footprint, recently leasing over 175,000 sq. ft of office space in Bengaluru and Pune. This aggressive expansion strategy could further bolster investor confidence by highlighting WeWork India’s growth potential.

Competitive Landscape and IPO Risks

The Indian flexible workspace sector has become increasingly competitive, with Awfis Space Solutions, Smartworks, and IndiQube offering alternative solutions. Awfis, which went public in May 2024, witnessed its stock being oversubscribed 108 times, signalling strong investor interest in the industry.

Despite its leadership in revenue and profitability, WeWork India faces tough competition regarding occupancy rates. In FY24, its mature centre occupancy rate stood at 85.55%, slightly behind Smartworks (86.77%) and IndiQube (90.06%). Additionally, as of September 2024, WeWork India’s net worth stood at a negative ₹259.88 crore, raising concerns about long-term financial stability.

Another key concern is the lack of fresh capital infusion, as the IPO is purely an OFS. Unlike companies that use IPO proceeds for expansion or debt reduction, WeWork India’s public offering primarily benefits existing shareholders rather than strengthening the company’s financial standing.

Will WeWork India’s IPO Be a Success?

WeWork India’s public listing is poised to be a landmark event in the country’s flexible workspace sector. The company’s Grade A office space focus (93% of its portfolio) and strategic locations in Tier-1 cities could work in its favour. However, investor sentiment may be tempered by macroeconomic uncertainties, rising interest rates, and concerns about long-term profitability.

The success of the IPO will largely depend on market conditions and investor confidence in WeWork India’s ability to sustain growth while managing costs. If the IPO garners strong interest, it could pave the way for more flexible workspace operators to go public. However, the listing could struggle to gain momentum if investors remain cautious.

Regardless of how the IPO unfolds, one thing is clear: India’s flexible workspace industry is rising, and WeWork India remains at its forefront.