Bengaluru-based flex-space provider IndiQube is betting on deeper penetration in high-demand tier-1 micro markets, from where it expects nearly 80% of its growth, even as a supply crunch in these clusters limits expansion opportunities for workspace operators.
“The concern is not demand. The concern is quality supply,” says co-founder Meghna Agarwal, in an interaction with Fe. She noted the lack of available office stock in key commercial hubs such as Koramangla, HSR, and CBD in Bengaluru, Guindy in Chennai, Avinashi Road in Coimbatore, Andheri in Mumbai, and Baner in Pune, despite sustained demand from startups and global capability centres (GCCs).
Brownfield Playbook
To counter the supply challenges, Agarwal added that the company often acquires older buildings in prime commercial locations and renovates them instead of waiting for new supply. About one-third of its portfolio consists of renovated properties, which are typically Grade B buildings in Grade A locations that are upgraded into premium workspaces.
Currently, IndiQube has 130 centres across 17 cities, including tier 2 markets such as Coimbatore, Kochi, Madurai, Vijayawada, Jaipur and Indore, among others. But these smaller markets constitute only 5-7% of its portfolio, and account for a small portion of its revenue.
In Q4, the company posted a 35% growth in revenue from operations to Rs 401.5 crore, while net loss narrowed to Rs 23 crore from Rs 32 crore. Adjusted cash earnings before interest and tax, or simply the cash generated from operations, were Rs 68 crore, compared to Rs 37 crore in the year-ago period. The company added that adjusted cash Ebit is a more accurate measure of operational profitability than Ind-AS Ebitda due to the impact of lease accounting.
Lease Accounting Friction
Ind-AS accounting capitalises long-term leases as assets and spreads the rental expense over the entire lease term. This tends to overstate Ebitda in early years while depressing net profit. To remove the impact of lease accounting, the company also provided its financials as per IGAAP accounting standards. According to that, profit after tax stood at Rs 30 crore, compared to Rs 26 crore in the year-ago period.
Going ahead, the company expects revenue growth between 25-30%, at an EBITDA margin of 18-21%. In Q4, EBITDA margin was 20%. The company also plans to add 1.5-2 million sq ft every year. Its current area under management is nearly 10 million sq ft, 15% more than FY25-end.