IPO gold rush or bubble? India's co-working firms test the public markets

Mint

5 hours ago

Bengaluru: During a board meeting of IndiQube Spaces Ltd mid last year, WestBridge Capital, a long-time investor, asked Meghna Agarwal and Rishi Das why they weren't considering an initial public offering (IPO).
The wife-husband duo co-founded the Bengaluru-based flexible workspace provider in 2015.
A month later, they took the IPO proposal to the board.
Two factors were at play. First, venture capital and private equity investment had slowed over the past few years, leading to new-age companies turning to the public markets for funding. In 2024, 13 startups, including Swiggy, Ola Electric, FirstCry and Blackbuck, went public. Second, Awfis Space Solutions Ltd became the first flexible workspace company to get listed in May 2024.
So, a decade after it was founded, IndiQube went public, becoming the third such firm in the sector, after Awfis and Smartworks Coworking Spaces Ltd. Its ₹700-crore IPO was subscribed 13 times. Shares of Indiqube listed on 30 July this year at ₹216 on the Bombay Stock Exchange (BSE), marginally down from the issue price. Meanwhile, rival Smartworks, also founded in 2015, raised ₹582.6 crore. Its shares, when listed, traded slightly above the issue price on the BSE.
As the commercial office market in India turned around after the pandemic, it saw strong demand pushing adoption for flex workspaces. These offices are shared and companies can rent for varying duration. In India, flexible workspaces come in two forms—co-working, where multiple companies can share the office premises, and managed offices, where space is customized for individual companies.
A cross-section of companies across sectors, including global capability centres (GCCs), have driven up leasing, and expansion. Flex leasing jumped from 7.9 million sq. ft in 2022 to 15.8 million sq. ft in 2024, as per property advisory CBRE India. The share of flex space leasing in overall office leasing grew from 14% to 20% during this period.
Avendus Capital, an investment bank, forecast that the sector will grow to address a $9 billion market by 2028.
With the three IPOs, and two more on the horizon—The Executive Centre India and WeWork India – India's fairly young flex workspace industry has demonstrated what globally no other country has yet. Multiple flex office sector IPOs from a single country is rare.
First-mover advantage
The IPO journey of India's flex workspace operators started a year back, with the public listing of Awfis. In many ways, it set the tone for the industry.
Amit Ramani, founder of Awfis, faced one persevering question from investors: If global companies had failed, how would you do it?
That seemed a valid question.
There was no precedent in India. The most celebrated name in the sector, globally, is WeWork Inc. Its planned IPO, at a $47 billion valuation in 2019, was a disaster—the company shelved it after questions were raised on governance and profitability. However, in October 2021, the company made its public market debut, through a special purpose acquisition company deal.
But Ramani proved his critics wrong. Awfis' shares are up 50% since the time it listed in May 2024. The BSE SmallCap index, in contrast, rose only 10% in the same period.
Analysts then said that the overwhelmingly positive response to the IPO issue (subscribed 108 times) was due to its first mover advantage—first-of-its kind entry into the listing space.
'I think the IPO changed the narrative in the industry on how people look at co-working," Ramani, also the chairman and managing director of Awfis, said.
Like IndiQube, even Awfis had private equity investors such as ChrysCapital and Peak XV Partners (formerly Sequoia Capital India & SEA), who eventually needed an exit route. The company had a substantial offer for sale component during its IPO, which meant its early investors got a partial exit. In comparison, in IndiQube and Smartworks' IPOs, a larger amount of the proceeds went towards capital expenditure on fit-outs and new centres, and paring high-cost debt.
While most of its peers do straight leases from landlords, Awfis follows a managed aggregation model. It partners with the landlords, and they bear the fit-out costs. Awfis operates the centres and they split the revenue or profit.
'While there were initial concerns around the co-working model and its global growth narrative, the Indian market dynamics are different. The flex model in India, which is a mix of co-working and managed offices, with a lot of emphasis on enterprise and GCC clients, is clearly demonstrating growth potential," said Prateek Jhawar, managing director and head, infrastructure & real assets investment banking, Avendus Capital. 'We have seen how Awfis has performed in the public market and how it has rewarded its investors. With the first successful IPO followed by the recent ones, flex is now seen as a separate asset class," he added.
The next two
But does the Indian market have an appetite for more flex IPOs?
'It's a new-age industry, with a lot of new players, with different models. So, investors are looking at them differently and that becomes a rerating exercise," Neetish Sarda, managing director of Smartworks, said during a pre-IPO interview with Mint. 'The flex space industry is growing and there is substantial depth in the Indian market," he added.
On the heels of IndiQube's IPO opening in July, The Executive Centre India, part of Hong Kong-headquartered TEC Group, filed draft papers to raise ₹2,600 crore. The funds will be mainly used for international expansion and acquisitions.
The Executive Centre was among the earliest international brands that opened in India—in 2008—at a time when flex working wasn't really in fashion. Today, it offers premium solutions.
The bigger IPO, however, could be that of WeWork India Management Ltd, one of the largest operators in the country and the Indian affiliate of WeWork Inc—the latter holds 22.28% stake in WeWork India.
The company received market regular Sebi's approval in July. The IPO will comprise the sale of as many as 43.75 million shares, though the company hasn't stated the amount it aims to raise.
'WeWork India is expected to launch the IPO early September. It may raise around ₹3,500 crore," said a person who didn't wish to be named. A WeWork India spokesperson didn't respond to queries.
The company has an operational portfolio of 7.8 million sq. ft, across 68 centres in eight cities.
Small to big
The buzz that the three flex IPOs generated among investors needs to be looked at from a broader industry perspective. What started as a co-working business to address the needs of startups, small companies, and even individuals, has undergone remodelling. There is rising demand for flex workspaces among larger enterprises. Subsequently, leading flex operators have leased office space from top developers, in premium business parks.
For instance, a cross-section of companies including MG Motor India, Quest Global, Narayana Health, SecurityHQ, Allegis Group, and Siemens among others have leased space in properties managed by IndiQube. The company also counts NoBroker, Myntra and Zerodha among its big clients.
Over 85% of IndiQube's portfolio is occupied by clients who have taken over 100 seats. Around 44% of the area is occupied by GCCs. For Smartworks, nearly 60% of its revenue is generated from companies that have taken up over 300 seats each.
Till three years ago, Awfis was primarily a co-working company catering to the requirements of small enterprises to a great extent. Then, it added managed offices for enterprises. 'I think our diversity of locations and client network worked well for us. The cost of supply has to be the lowest and the return on capital has to be high to succeed," Ramani said.
Growth narrative
Flex operators, meanwhile, have big growth ambitions.
Awfis plans to add 40,000 seats in 2025-26; Smartworks has 11.92 million sq. ft in its portfolio as on 30 June, of which 8.3 million sq. ft is operational. It plans to scale up further.
'The growth will be more democratic from here on, and one has to go to tier II markets. We have been growing at 30-35% every year, and that will continue," IndiQube's Rishi Das said.
As per property advisory JLL India, India has seen remarkable growth of operational flexible space stock, which has now reached a substantial 79.1 million sq. ft across the top seven cities—Bengaluru, Chennai, Delhi-National Capital Region, Hyderabad, Kolkata, Mumbai and Pune.
The operational flex stock is expected to nearly double over the next four to five years, and reach 135 million sq. ft by 2028, reshaping the country's evolving office landscape.
'2025 has started strongly for flex operators. In the last one year, operators have acquired space in many Grade A (the most premium quality in real estate) buildings to strengthen supply. The IPO route will help these companies access capital and grow faster," said Karan Singh Sodi, a senior managing director at JLL India.
Meanwhile, Awfis wants to build ancillary businesses, going forward, moving from just being a flex player to becoming a 'commercial solutions platform". This could mean building food and beverage, or transport and mobility solutions for other companies.
'We will continue to lead the value bandwagon, even when we offer premium products like 'Elite' or 'Awfis Gold'. It's very difficult to deliver value; it's a bit easier to spend more money in terms of services, design, and price the product more," said Sumit Lakhani, chief executive officer (CEO) of Awfis.
A regular seat at the company costs ₹8,000 a month. Gold is priced at ₹10,000 per seat while Elite is even pricer— ₹12,000 a seat.
Elephant in the room
In July, IT bellwether Tata Consultancy Services said that it is laying off 12,000 employees, and while the cause was attributed to a skill mismatch among other things, industry observers signalled artificial intelligence (AI) to be a possible reason behind the sacking. Tech companies are moving towards leaner, AI-savvy teams.
This is also ominous news for real estate, and by extension, flex workspace providers.
IT services companies, even a few years ago, hired truckloads of freshers from engineering colleges across the country and they all needed seats in fancy Grade A buildings. If AI impacts IT jobs in a big way, going ahead, the fallout on the commercial office sector would be inevitable.
IndiQube's Das said one has to wait and see how the scenario plays out. 'It's like the elephant in the room. However, amid the uncertainty, if large companies decide to outsource office space instead of owning expensive real estate, flex workspaces would be their first port of call," he hoped.
Analysts have also raised another concern—profitability. With the commercial office market at an all-time high, and flex operators scaling up, acquisition costs, which includes the cost of leasing and fit outs among other expenses—have also risen.
Besides, there is increasing competition as companies compete to swoop up good quality real estate and tenants. 'While there is competition, growth isn't a challenge. Overspending on fixtures (fit outs) by the operators could be a concern," Avendus Capital's Jhawar said.
In 2024-25, only Awfis was profitable for the full year. WeWork India is yet to file full year financials but in the first half of the year, it reported a net profit of ₹175 crore. Smartworks and IndiQube continue to make losses.
The reported losses are primarily due to non-cash accounting adjustments under Ind AS 116, an accounting method, which front-loads expenses through depreciation and finance costs, spokespersons of Smartworks and IndiQube stated.
All the top operators, however, are generating strong cash flows at an operational level, and have raised institutional money before their IPOs, which drove expansion.
'This is not a typical cash burn model. However, while the mature centres turn profitable at the operational level, the newer centres will take time to break even," an analyst at a Mumbai brokerage, who did not want to be identified, said. 'As more centres mature, profitability, at least for the top, credible players should not be a concern," the analyst added.
For investors, those are encouraging words.