Awfis Founder Amit Ramani On How To Pound A Blockbuster IPO

The last month or so has been eventful for coworking startup Awfis, to say the least. Days after it got listed on the exchanges at a premium of about 13% to its issue price, the startup reported that it turned profitable in the March quarter (Q4) of the financial year 2023-24. 

Awfis posted a profit after tax (PAT) of INR 1.4 Cr on an operating revenue of INR 232.3 Cr in Q4. However, it continued to remain a loss-making entity for the fiscal year 2024.  

While it remains to be seen if the startup can sustain this profitability in the coming quarters, Awfis chairman and MD Amit Ramani sees it improving its operating margin.

In an interaction with Inc42, Ramani said operating leverage has started kicking in for the Peak XV Partners-backed startup, and it is on track to breach the INR 1,100 Cr revenue mark in FY25.

Founded in 2015 by Ramani, Awfis claims to be the largest flexible space operator in the country with 181 centres, around 1.1 Lakh seats, and about 5.6 Mn square feet of chargeable area, as of March 31, 2024. Over the years, the startup has evolved from being a coworking network to a tech-enabled workspace solutions platform, catering to enterprises, freelancers, startups, and SMEs. 

Delving deeper into understanding the startup and its aspirations, we spoke with Ramani, who deliberated on an array of topics from the startup’s business model to its success playbook and outlook for the next fiscal.

Here are the edited excerpts…

Inc42: How do you see Awfis’ successful debut on the stock exchanges? What are the key principles that have led the company in this journey? 

Amit Ramani: The listing is a milestone in our journey, not a destination. After getting listed at a premium, our shares also rallied quite a bit, but we don’t control the market. What we control is our own business, and we have always strongly believed in our business. 

Our public issue was oversubscribed 108 times. We are very fortunate that some of the best mutual funds in the country are backing us today. 

Talking about our key philosophy, it revolves around how we built the company and its basic blocks.

To start with, the managed aggregation model, the supply-side acquisition, and scaling this strategy across 120 centres out of a total portfolio of 181 centres has been a key part of our business success. 

It did two things for us. First, it made us capital-light because the landlords were investing a large portion of capital for the fit-out of new properties. Second, the landlords were taking equal risks with us, becoming our true partners in this profit-sharing model.

Next, we were always clear that we are a customer-centric business. We are very structured on delivering value for a customer and have the highest net promoter score in the country.

The robust demand and our network of coworking spaces have helped us scale over the years.

And the final thing is that we are very focussed on EBITDA. Now, how does the EBITDA flow? It flows if my centres have the right occupancy. This translates into contribution margin, or EBITDA margin, which contributes to the overall EBITDA and ultimately PAT.

So, the Q4 PAT is a reflection of improvements in our contribution margin and in our overall EBITDA level.

Inc42: While Awfis has been EBITDA positive since 2021, it was loss-making until Q3 FY24. What led to the positive PAT in the March quarter?

Amit Ramani: We were INR 47 Cr negative in the bottom line in FY23. When we reported the Q3 numbers for FY24, we were about negative INR 18 Cr in nine months of the fiscal year. So, a huge change happened there. Clearly, you start seeing operating leverage coming in as the scale increases and operating efficiency improves.

Besides, we are a net debt-free company and a very capital-efficient business. 

Inc42: How do you see Awfis’ growth from here? Will the PAT be positive in FY25?

Amit Ramani: While I cannot comment on exact profitability for our future quarters, we have demonstrated that we are on that path. 

The company is built on the first principles. When we became EBITDA positive two-and-a-half years ago, we maintained that every quarter. 

Now, we also project that our EBITDA margin will improve by 1.5% in FY25, and we are looking at about 30% revenue growth in the current fiscal year, which will take our top line beyond the INR 1,100 Cr mark. 

I am saying this with a lot of confidence because we exited March 2024 with 95,000 seats. We have projected to add 40,000 seats this year. Of these, 32,000 seats are already with us, and we are in advanced discussions for at least 10,000 seats. So, if we just continue to deliver on our metrics, it’s a clear path to revenue growth. 

Inc42: So, what will the Tier-I & II mix look like for these 40,000 seats? 

Amit Ramani: The 40,000-odd seats will be spread across 60-70 locations. About 85% of these have been allocated for Tier-I cities and the remaining for Tier-II cities.

Inc42: The startup ecosystem has seen a number of layoffs in recent times. Has Awfis ever taken any such steps?

Amit Ramani: We feel proud that we have not done any layoffs in the company in the last nine years of our journey.

We did a bit of a pay cut during the Covid-19 pandemic, but whatever amount we deducted during that 3-4 month period, we gave 2.5X of equivalent stocks to every single teammate in the company.

Inc42: Do you have any advice for startups looking to go for IPOs in the coming days?

Amit Ramani: The first thing is that your business model has to be very solid. It’s easy to talk about a lot of things in the private domain but when you’re going public, you have to declare every single element of your business. 

You need a very strong business model, and it has to be differentiated enough that people see that there is an opportunity to invest in a high-growth story in a country like India, which is probably one of the best places in the world today for investors to invest.

Additionally, your path to profitability has to be clear because people are ultimately looking for positive cash flows in the public market. When we went public, we were not profitable, but we were able to demonstrate our ability to turn profitable in our first earnings report following our listing.

Then, (corporate) governance has to be of the highest level, and another important aspect is disclosures.

One of the most crucial aspects is the team, as it’s ultimately the management team that investors are backing. An extension of that is how you constitute your board. 

Inc42: How does Awfis make sure that it has top-notch governance guardrails?

Amit Ramani: It starts with how you run the business. That’s a reflection of how your management is structured, how you have been able to engage them by providing the right environment for them to be successful. 

For this, we take external cues and conduct internal surveys. We are GPTW certified four years in a row. We also maintain a high level of transparency within the company.

The second piece of it is the kind of partners that we work with – the internal and statutory auditors. Besides, we have a great and credible set of investors.

Also, since we are in the real estate market, and we build coworking spaces, being ESG-compliant is crucial for us — almost all our centres are ESG-compliant.

Though we can’t predict every cycle, given the external environment and macroeconomics, governance is also about keeping your investors, shareholders, and teammates informed about the core strengths of your business, the risks, and making other necessary disclosures.

And, I think, public markets reward you for it (good corporate governance).