Flexible Work, Fixed Returns? Breaking Down WeWork India & IndiQube’s Public Listings

It’s raining IPOs in some of India’s most exciting new-age sectors, from fintech to travel tech and foodtech to enterprise tech, and coworking startups are eager to get drenched too. 

The craze to list on the Indian bourses among Indian startups working in the coworking segment is such that at least two ventures, WeWork and IndiQube, have filed their respective draft red herring prospectus (DRHPs) with the Securities and Exchange Board of India (SEBI) in the last two months.

While WeWork India’s IPO comprises only an offer for sale (OFS) of 4.37 Cr shares, IndiQube plans to raise INR 750 Cr through a fresh issue of shares and INR 100 Cr via OFS.

Notably, coworking and flexible workspaces saw a demand surge after the Covid-19 pandemic, as companies started inclining towards remote and hybrid work models and preferred to become asset-light. Amid this, the successful public listing of Awfis in 2024 acted as a major catalyst for its competitors, who were already mulling the IPO route.

Riding this wave of positive market sentiment for flexible workplaces and an expected demand surge in the coming years, at least four companies in this sector — Smartworks, DevX, WeWork, and IndiQube — are likely to get listed this year. BHIVE and Table Space are also mulling their public listings in the near to medium term.

Among these names, WeWork India, which is the leading flexible workspace provider in the country in terms of its revenue, has first-hand witnessed the consequences of failed coworking business models. 

Now, before we delve deeper into understanding how WeWork India and IndiQube stack up against each other in the run-up to their respective IPOs, let’s steal a glance at WeWork’s history.

WeWork India: The Poster Boy Of Coworking

Founded by Adam Neumann and Miguel McKelvey, WeWork began its operations in 2010. Backed by the likes of SoftBank Group and Goldman Sachs, “WeWork” became synonymous with the term “coworking” globally.

When WeWork India was set up in 2017, India’s coworking sector was nascent. Despite this, names like Awfis, 91Springboard, BHIVE Workspace, and IndiQube were operational in the country, and Bengaluru led the show. 

The India business was set up as a joint venture between the Indian office development company Embassy Group and the US-based coworking company WeWork.

In 2019, WeWork Inc’s parent entity filed for a $1 Bn public offering with the US market regulator Securities and Exchange Commission (SEC). Soon after, financial and management troubles broiled up in the company, leading to a withdrawal of its IPO papers.

Two years later, WeWork went public through a special purpose acquisition (SPAC) merger with BowX Acquisition Corp. However, due to the Covid-19 pandemic, WeWork’s occupancy rate dropped significantly. Amid surging losses and other governance issues, it filed for bankruptcy at a US court in November 2023.

Once valued at $47 Bn, WeWork collapsed amid legal and corporate governance issues, leading to concerns about its impact on WeWork India. 

However, WeWork India claimed that its business was unaffected by the US entity’s bankruptcy, as WeWork Inc. held only around 27% stake in the India business and the remaining belonged to the Embassy Group. WeWork Inc. sold its entire stake in the India business last year.

Currently, 1 Ariel Way Tenant Limited holds a 22.72% stake (3.14 Cr shares) in WeWork India, while Embassy Group owns the remaining 73.82% stake (10.21 Cr shares).

As part of the OFS, Embassy is offloading 3.34 Cr shares in the company while 1 Ariel Way is also partially selling its stake (1.03 Cr). 

While WeWork India’s top line growth has been promising in the past few years despite the ongoing legal tussles at WeWork Inc., the former’s path to getting listed on the Indian bourses might not be straightforward. 

As per its IPO papers, as of September 2024, WeWork India does not have its own registered intellectual property rights. As the exclusive licensee of the WeWork Brand in the country, the coworking space provider still uses WeWork Global’s brand and intellectual property rights.

WeWork India is also dependent on this global brand, which operates with about 600 wholly owned and licensed locations in 35 countries, to attract global enterprises to its India offices.

Meanwhile, the coworking space provider said in its DRHP that if WeWork Inc. files for a Chapter 7 bankruptcy petition for its liquidation, there is a risk that WeWork India might not be able to use the “WeWork” trade name anymore as the WeWork Inc. group ultimately owns the trademark. This would materially and adversely affect its business, results of operations and cash flows.

Besides, any default by WeWork Inc., WeWork International Limited or any other entity using the “WeWork” trade name on its debt repayments can negatively impact the WeWork Brand in general and hence, WeWork India.

In addition, WeWork India still relies on WeWork International Limited for certain technological solutions relating to our operations, such as desk booking or visitor management systems, and it adheres to global standards prescribed by WeWork International Limited on certain processes and systems, which might require it to make extensive changes to its operational procedures and product standards.

Hence, as WeWork India gets ready for its debut on D-Street, there are many such concerns in the market around this IPO.

Besides profitability, valuation will play a key role in deciding whether WeWork’s IPO can become a successful IPO story. 

What’s In Offer From IndiQube?

Founded in 2015 by Rishi Das and Meghna Agarwal, IndiQube works as a managed office space provider that offers an ‘office in a box’ experience to clients. This includes workspace design, interior fit-outs and various B2B and B2C services powered by technology.

It also follows an asset-light business model, focussing on leasing rather than owning properties. The startup says the model allows it to secure 10-year leases with a three-year lock-in period, extendable for another 10 years, ensuring flexibility and control in its arrangements with lessors.

Backed by WestBridge Capital and ace investor Ashish Gupta, it has raised over $45 Mn in private funding to grow over the years.

As of June 30, 2024, the company claimed to manage a portfolio of 103 centres across 13 cities, covering 7.76 Mn sq ft of built-up area under management (AUM), with a total seating capacity of 1.72 Lakh.

As part of the OFS component in its INR 850 Cr IPO, promoters Das and Agarwal are offloading INR 50 Cr worth of shares each. Its other promoter Anshuman Das is not offloading any of its stake.

WeWork India & IndiQube: A Head-To-Head Comparision

First, it is important to note that WeWork India and IndiQube have separate business models. IndiQube works as a managed workplace solution provider. Its solutions range from providing large corporate offices (hubs) to small branch offices (spokes) for enterprises. 

Its core strategy hinges on acquiring buildings in high-demand micro-markets with robust infrastructure connectivity, low vacancy rates, and strong talent catchments. 

“This targeted approach ensures the long-term relevance of our offerings while enabling us to scale rapidly,” IndiQube mentioned in its DRHP.

The company partners with landlords to lease new properties and transform non-institutional and ageing Grade B properties into greener and modern workspaces by integrating interiors, amenities, technology, and sustainability initiatives.

Workspace leasing forms the core of its revenue. IndiQube also provides various other value-added services, including interior design and build, facility management, food, transport, and technology solutions. 

In its DRHP, the company said that its backward integration initiatives such as asset renovation and upgradation and forward integration to offer B2B and B2C services to clients and their employees, as well as core offering of plug-and-play workspace solutions enables the company to serve the entire workspace value chain comprehensively.

On the other hand, WeWork India brands itself as a “premium” flexible workspace operator with a variety of offerings, including enterprise office suites, customised managed offices, private offices, coworking spaces, hybrid digital solutions, and more. 

The company provides these workspaces with flexible lease terms that range from pay-per-use options to long-term contracts.

Of its 59 operational centres, 51 WeWork buildings currently are leased from landlords to run as WeWork Centres, where the company is responsible for fit-outs, and it collects membership revenue directly. 

Only three of its centres (59) run as “operator model”. Under this model, the company operates properties on behalf of landlords and retains a portion of the revenues as fees. As many as five of these centres provide facility management and fit-out rental services, generally for a fixed fee.

Unlike IndiQube, WeWork India is also heavily focussed on enterprise clients, who contributed 76.21% to its net membership fee in FY24. This strategy has perhaps helped WeWork India to build a more stable customer base with bulk orders for long periods of time.

WeWork India’s client base comprises names like JP Morgan, Amazon, Dyson, Deutsche Telekom, Grant Thornton, and several startups.

Though IndiQube, too, has enterprise clients, these are usually mid-to-large enterprises, with IT companies comprising almost 50% of the client base. Some of its top clients include Zerodha, Myntra, NoBroker, Perfios, upGrad, and Siemens.

Both WeWork and IndiQube earn a majority of their revenues from workspace leasing while ancillary services contribute around 10-11% to each of their top lines. 

For instance, of IndiQube’s INR 867.66 Cr operating revenue, INR 741.6 Cr came from workspace leasing in FY24 and INR 92.2 Cr (implying 11%) from value-added services. 

WeWork India generated INR 1,402.5 Cr as membership revenue and INR 178.1 Cr as service and ancillary revenue.

WeWork’s ancillary revenue comes from hordes of services, including WeWork Labs-Accelerator Program for Startups, WeWork Events & Hospitality, WeWork Workplace- Office SAAS, and more.

Now, the story is not this simple, especially if we consider their other competitors.

Before WeWork and IndiQube, Awfis has already gone public giving almost 2X returns to its investors since its listing. While this has set a strong path for others to go public, the competition has grown.

Now, in terms of both the number of seats provided and the cities present, WeWork stands way below Awfis, IndiQube, and its other IPO-bound peer Smartworks. 

Awfis currently has more than 1.1 Lakh seats spread across 17 cities while WeWork India has 93,786 seats in eight cities. IndiQube has more than 1.18 Lakh seats, the highest.

Awfis is also quite asset-light. It runs a majority of its centres in a “managed aggregation model” where landlords share rewards and risks alike.

“Now, each of these models has its advantages and disadvantages,” said Utkarsh Kawatra, cofounder and CEO at myHQ by ANAROCK.

He added that as Awfis runs largely on a revenue-sharing model with landlords, its spaces are not necessarily all prime assets and are smaller. This makes them affordable for smaller companies and startups. Also because their centres are smaller, it allows Awfis to have a greater footprint (compared to WeWork) and have more centres in more cities. 

WeWork’s centres are larger (around 50K-1 Lakh sq ft) and largely fall under Grade A assets, which makes its pricing more premium and changes its client base. 

“A startup with a small member of five people, which is looking to save money, will not pay such a high premium to take up a Grade A asset in WeWork, they would go to the likes of Awfis or other players,” said Kawatra.

Meanwhile, IndiQube had the highest occupancy rate of 90.06% as of March 31, 2024. WeWork’s occupancy stood at 85.55% as of this period and Awfis’ at 84%.

Besides, valuations would play a critical role in these IPOs. While WeWork India’s IPO valuation is not confirmed yet, some media reports suggest that it may be looking at a valuation of $2 Bn-$2.5 Bn. In comparison, its listed rival Awfis’s current valuation is around $540 Mn.

Prashanth Tapse, senior VP (research) at Mehta Equities believes that the new coworking spaces going IPO will seek a valuation at least 6X higher than Awfis, which is justified. However, a premium above 8X of Awfis’ valuation would be considered expensive by the market.

Moving on, fundamentals will also play an important role here. If IndiQube seeks a valuation of more than $1 Bn, it will be considered expensive because its sales are the lowest among its IPO-bound competitors and Awfis.

At a time when profitability is key, both WeWork and IndiQube continue to be loss-making entities while Awfis has already turned profitable.

What Lies Ahead?

In its recent report, Knight Frank Research said that coworking spaces constituted a substantial 68% of all flexible space transactions during 2024 compared to 58% in 2023 in India.

Besides Bengaluru, which leads the flexible workspace market in India, cities including Chennai and Hyderabad are also catching up in the race. As per the report, 15% of Chennai’s office space transaction volumes in the second half of 2024 comprised flexible workspace operators. 

“Key players such as Symbyont, WeWork, Awfis, Table Space were the most active operators in the flex space segment… The flex space segment has become a significant part of the commercial real estate market as the flexibility, cost savings, and adaptability of these workspaces continue to attract a diverse range of businesses,” the report noted.

Similarly, in Hyderabad, the share of transactions by flex space operators surged to 19% in the second half of last year from 8% in H2 2023. Meanwhile, transaction volume grew 116% year-on-year. 

Key players like Smartworks, IndiQube, Table Space, and Awfis played a pivotal role in this expansion, the report observed.

As per CBRE data, India is one of the largest flexible workspaces markets in the APAC region with a total stock of over 72 Mn sq. ft. in Tier 1 cities as of the first half of 2024.

Hence, per the current market trends, the demand for flexible workspaces is increasing in tier-I cities. This has created a steady growth path for the top companies providing solutions here.

“The market is very promising right now. Pre-Covid 19 era, everybody expected the coworking space to cover around 9-10% of the commercial real estate leasing market. Now, it’s capturing more than 20% of the market,” said Kawatra, adding that companies also like the flexibility that coworking spaces offer.

Kawatra sees this trend continuing for at least the next two to four years. Also, while there is a growing traction of flexible workspaces in tier-II cities, the trend is in its nascency largely dominated by tier-1 cities, which capture more than 80% of it. 

However, at a time when the Indian market remains volatile and fundamentals remain key, the valuations of these companies will be keenly watched along with their paths to profitability.

Tapse of Mehta Equities believes that WeWork and IndiQube may be taking a risk by planning to get listed. This is because the overall market sentiment currently is a “bit dovish and there is a macroeconomic downturn”.  

“However, if I were to extrapolate Awfis’ market performance, it’s trading 80% higher than its IPO price, which would encourage new investors to take the risk and invest in the upcoming coworking IPOs.”

Come as it may, it would be interesting to see if WeWork India can rewrite its success story on the Indian bourses with IndiQube and Smartworks standing as major competitors. 

[Edited By Shishir Parasher]