After Awfis, three major co-working firms mull Initial Public Offering in 2025: Sources

Following Awfis Space Solutions’ Initial Public Offering (IPO) recently, at least three major co-working and managed workspace providers, including Embassy Group-backed WeWork India and Gurugram-headquartered Smartworks, are preparing to make a market debut in 2025, industry sources in the know told HT Digital.

“Both WeWork India and Smartworks are going for an IPO within 12-18 months,” one of the sources said on condition of anonymity.

“WeWork India is in early or exploratory stages, their investors are looking at it,” a second source added.

Additionally, a top executive of a Bengaluru-headquartered co-working firm confirmed to HT Digital on condition of anonymity that the company is planning to go public within the next 12 months. The individual also stated the likelihood of a significant fundraise prior to the exercise.

While Smartworks did not respond to HT Digital’s email query, WeWork India wrote: “...WeWork has not officially shared anything in the media. We won’t have any further inputs to share here.”

Riding the market wave

Valued at ₹599 crore, Awfis Space Solutions’ IPO last month saw upbeat investor interest, with bidding on the final day, May 27, registering subscription to the tune of 108.17 times. Marquee names in the anchor book included Goldman Sachs, EastBridge Capital Master Fund, HDFC Mutual Fund and ICICI Prudential MF, among others.

“Awfis’ IPO has brought significant legitimacy to the industry and from an investor’s point of view this is an industry that is going to stay,” said Shesh Rao Paplikar, founder and chief executive of Bengaluru-based co-working firm BHIVE Workspace.

“From many investors’ perspective, flexible leasing is a new industry. There was no company that had done an IPO in India, so there was no benchmark for them. Whatever we said was our story," said Paplikar, adding that post an IPO there is a clear legitimacy that institutional investors and the public market believe in the company or industry, because success follows auditing and scrutiny of various aspects, including by market regulator SEBI.

As reported by HT Digital last week, BHIVE is eyeing a 2026 timeline to launch its own IPO, and active preparations towards the exercise are likely to commence once the company surpasses the ₹500-crore milestone in topline.

Also read: Tier-II cities emerge as new ground for flexible office operators; Ahmedabad records highest flex stock

“Generally, the overall real estate market, including the listed players, is doing very well. So, there’s a certain wave in place,” highlighted Viral Desai, who is a senior executive director at property consultancy Knight Frank India.

Others agreed. “Domestic investors or retail investors, everybody believes in the India story from an overall office perspective. As opposed to what is being heard about the global scenario - people not returning to offices or delinquency issues in the US - India office market demand is very strong,” said Rohan Sharma of property consultancy JLL.

Favourable size and scale

Experts told HT Digital that Smartworks and WeWork India are amongst the top five players in the flexible workspace segment, and with their size and scale, a smooth replication of Awfis’ success may not be a tall order for the two players.

Also read: Managed office space provider Smartworks aims to hit 25 m sq ft across 14 cities in 4-5 years

According to information available in the public domain, WeWork India recorded a revenue of ₹1,800 crore in the financial year 2023-24. The company operates 55 facilities, spanning over 8 million square feet, across eight cities.

Smartworks, on the other hand, aimed to close FY24 with a topline of ₹1,200 crore and total footprint of 10 million square feet, company founder Neetish Sarda told HT Digital last year. The brand presently operates over 40 centres across 10-plus cities.

Interestingly, Awfis reported an operational income of ₹849 crore, alongside a loss of ₹18 crore, in the financial year 2023-24. As of December 31 last year, Awfis commanded presence across 48 micro markets in 16 cities.

Investors inclined to loosen purse strings

Besides public funding, the flexible office segment is also witnessing increased interest from private equity and institutional investors following the first major market debut, industry players who spoke to HT Digital said.

“Since the time Awfis did its IPO, the number of investors that have been reaching out to us in general has increased,” said Paplikar, adding that the interest amongst bankers has also registered an uptick.

“The US commercial real estate market is witnessing massive vacancy levels. If you look at WeWork India’s private funding and then the Awfis IPO, global investors have been able to decouple the Indian commercial real estate story from the US story,” said Rishi Das, founder and chief executive of IndiQube.

Also read: Office buildings in Mumbai’s Bandra Kurla Complex command higher prices than Manhattan

Rising trajectory

As per data collated by Knight Frank India, flexible workspace providers transacted 3.8 million square feet of office space across the top 8 markets of India in the first quarter of the ongoing calendar to account for 23% of overall transactions in the segment.

Also read: Flex office space contributes to more than one-third of Delhi-NCR's office leasing activity in Q1 2024

Additionally, owing to factors such as changing workplace dynamics, a flourishing startup ecosystem, conducive government policies and infrastructural advancements in non-metro cities, players in the segment are deepening their presence beyond the metros.

A study by Avendus Capital shows that the flex workspace segment in India is expected to grow at a compounded annual growth rate of 15% to up to 126 million square feet by 2028, amounting to a market size of about $9 billion.

Also read: At 27% Mumbai witnesses the highest coworking rental growth since FY20