Can Smartworks’ IPO Capitalise On The Growing Flexible Workspace Trend?

Can Smartworks’ IPO Capitalise On The Growing Flexible Workspace Trend?

SUMMARY

After the recent IPO of Awfis, Gurugram-based Smartworks is also hoping to ride the ongoing IPO wave and filed its DRHP

It claims to be the largest managed campus operator among benchmarked peers in terms of total workspace stock as of March 31, 2024, managing 8 Mn sq. ft across 39 operational centres

Agile startups, SMEs, big enterprises/MNCs, nearly everyone is drawn towards flexible workspaces for their cost-efficiency, scalability and more, making a lucrative market for flexible workspace platforms. More startups in this space are looking to go public within a year or two

When coworking space rental startup WeWork filed for IPO in August 2019, the unicorn had lofty valuations ($47 Bn), funding poured in (SoftBank alone put in about $10.5 Bn), and its global business had grown (it ran offices in 111 cities across 29 countries). But the startup had a “history of losses”, said WeCo, WeWork’s parent company, in its prospectus, and the filing showed the details.It filed a draft red herring prospectus (DRHP) with SEBI in early August for a fresh issue of equity shares worth INR 550 Cr and an OFS (offer for sale) of 67.59 Lakh equity shares by promoters. Smartworks is backed by Ananta Capital Ventures, Plutus Capital, Singapore-based Keppel and other marquee investors and has raised INR 385.6 Cr (about $46 Mn) across two rounds. A CEO at a leading coworking space provider company told Inc42 that India’s growth narrative, coupled with a commercial real estate boom, is creating a conducive environment for flexi workspace startups. The top executive also pointed out that this new-age business model could help generate value for public shareholders and provide a relatively transparent and potentially lucrative investment channel for those keen to invest in the real estate space. A 2024 report by Avendus Capital also forecasts that the flexible workspace sector will expand to 126 Mn sq. ft by 2028, at a 15% CAGR, and address a $9 Bn market. This is expected to attract growth capital players and noted private equity firms, HNIs and family offices, venture debt and structured credit companies, the report says. Unlike most startups, Smartworks’ approach to funding has been notably frugal. After securing $25 Mn in FY20, it refrained from raising a second round until 2024. Nevertheless, it has nearly doubled the number of operational centres from 23 in 2019 and maintained steady revenue growth.They are also positioned differently in terms of business models and underlying fundamentals, says Umesh Chandra Paliwal, cofounder and CEO of UnlistedZone, a trading platform for unlisted stocks. The CEO notes that Smartworks has carved a niche as a premium provider for large enterprises, offering standardised, tech-enabled campuses. It also runs larger centres with more super built-up areas.“Both providers are well-positioned to benefit from the current trends and their respective strategies cater to different market segments,” said Paliwal of UnlistedZone.

The inevitable followed. Its colourful CEO Adam Neumann stepped down a month later and the IPO was withdrawn. The company eventually went public in late 2021 at a valuation of $9 Bn. But in November 2023, WeWork and more than 400 of its other entities (including many individual subsidiaries) filed for bankruptcy. WeWork India is thriving, though, and reportedly caters to 70K+ members. 

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