Plush office spaces, flexible schedules, offices at a stone’s throw from your house—WeWork India Management has no doubt changed the way Urban India goes to work. Chic, sophisticated co-working spaces have solved a key problem in most of our big cities: ‘space’. These co-working spaces spread across 8 cities and 68 centres have redefined workplace dynamics like never before.
The company is now formalising its plan to go public. After the Securities Exchange Board of India (SEBI) nod for the Initial Public Offering (IPO), reports indicate that WeWork India is now preparing to launch a Rs 3,500-4,000 crore IPO in August. Here is a look at everything you need to know about this issue-
WeWork IPO: Issue details, price band
WeWork IPO will be a pure Offer for Sale (OFS). That means the company won’t be getting any fresh capital. Only existing shareholders will be offloading part of their stake.
The OFS involves a total of up to 4.37 crore equity shares. Of this, promoter entity Embassy Buildcon LLP will offload up to 3.34 crore shares, while investor 1, Ariel Way Tenant, will offer 1.02 crore shares. The average cost of acquisition for these shares stands at Rs 161.83 and Rs 65.88 per share, respectively. Since it is a secondary sale, none of the proceeds will go to the company.
The IPO will follow the book-building route, in line with SEBI’s norms. The issue has been structured to allocate 75% to Qualified Institutional Buyers (QIBs), 15% to Non-Institutional Investors (NIIs), and 10% to Retail Investors. Additionally, up to 5% of the post-offer equity is reserved for eligible employees, who may also receive a discount on the final offer price. An anchor investor portion will also be carved out a day prior to the IPO opening.
WeWork IPO: Lead managers and listing plans
The listing of this issue is planned on both the Indian bourses – BSE and NSE, and a minimum of 1,000 allottees is required for the IPO to proceed. If QIBs do not subscribe to at least 75% of the offer, the issue will be withdrawn and the application money refunded.
The IPO will be managed by JM Financial, ICICI Securities, Jefferies India, Kotak Mahindra Capital, and 360 ONE WAM, with MUFG Intime India acting as the registrar. The exact bidding dates are yet to be announced.
WeWork IPO: Fund utilisation
WeWork India’s upcoming IPO won’t bring in any fresh capital for the company. That’s because the entire issue is an Offer for Sale. As a result, the proceeds, after deducting relevant taxes and offer-related expenses, will go entirely to the selling shareholders, not to the company itself.
The key purpose behind the IPO is simply to list WeWork India’s shares on the stock exchanges. As per the DRHP filing, this is expected to improve the company’s market visibility and offer an exit or liquidity option to existing shareholders. There is no direct fund infusion into the business from this offering.
WeWork IPO: About the company
Launched in 2017, WeWork India Management, formerly known as Halosaur Bengaluru, is a leading premium flexible workspace operator in India. WeWork provides flexible, high-quality workspaces to a diverse customer base, including large enterprises, small and mid-size businesses (SMBs), startups, and individuals.
The company’s core operations involve leasing majorly Grade A office space from leading developers in Tier 1 cities. WeWork then designs, builds, and operates these spaces as flexible workspaces to global standards. As of June 2024, approximately 93% of their portfolio was in Grade A developments.
The company’s offerings include:
- Private offices
- Customised managed offices
- Enterprise office suites
- Custom-designed buildings, floors, and offices
- A suite of digital products such as WeWork On Demand, Virtual Office, WeWork All Access, and WeWork Workplace
- Value-added services include customisation, parking, additional meeting rooms, event spaces, advertising, food and beverage services, office infrastructure services, printing, mail and package services
WeWork Scale and Presence
WeWork operated 59 operational centres across eight cities in India (Mumbai, Pune, Bengaluru, Chennai, Hyderabad, Delhi, Gurgaon, and Noida) as of September 2024. The company’s desk capacity in operational centres was 94,440. The company has been the largest operator by total revenue in India for the past three fiscal years, according to CBRE.
WeWork IPO: Key Business Strength
First of all, the company is majority-owned and promoted by Embassy Group, a leading real estate developer in India with over 30 years of experience. This backing provides access to marquee buildings and a portfolio of large tenants.
WeWork is considered a leading and inspirational brand in India, with a loyal customer base. It has significantly contributed to the growth and evolution of the flexible workspace sector.
WeWork India Management is the exclusive licensee of the WeWork Brand in India, benefiting from WeWork Global’s international presence to attract global enterprises.
WeWork IPO: Financial Performance
WeWork has incurred net losses in fiscal year (FY) 2024, 2023, and 2022. These losses, along with negative cash flows in FY24 and FY22. However, for the six months ended September 2024 (H2FY25), the company reported a net profit of Rs 174.13 crore.
| Fiscal Year | Net Loss (Rs. Cr.) |
| 2022 | 643 |
| 2023 | 145.86 |
| 2024 | 135.84 |
However, the net loss significantly decreased by 77.32% in FY23, falling to Rs 145.86 crore from a loss of Rs 643 crore in FY22. This substantial reduction in net loss was driven by a combination of increased income and managed expenses, primarily influenced by strong demand and operational adjustments.
The company’s total income increased by 70% to Rs 1,422.77 crore in FY23 from Rs 836.67 crore in FY22. Plus, membership revenue grew by 495.61% to Rs 49 crore in FY23 from Rs 8.19 crore in FY22. This was primarily due to a 196.62% increase in revenue from ‘On-Demand’ services and the introduction of new offerings like ‘All-Access’ and ‘Virtual Office’.
So, the significant reduction in net loss in FY23 was primarily driven by a substantial increase in membership revenue, a large gain from lease terminations, and a favourable decrease in depreciation expense due to an accounting policy change.
But again, WeWork experienced negative net worth in the past and may continue to do so in the future. This can primarily be attributed to lease accounting under Indian Accounting Standards (Ind AS) and operating losses.
The net worth figures for the company as of H2FY25 came in at Rs (260) crore.
| Fiscal Year | Net worth (Rs. Cr.) |
| FY22 | -154.73 |
| FY23 | -292.11 |
| FY24 | -437.45 |
WeWork Revenue from Operations
The company’s revenue from operations for the six months ended September 2024 came in at Rs 918.19 crore. For FY24, the revenue stood at Rs 1,665.14 crore, marking an increase of 26.67% from FY23 when it reported Rs 1,314.52 crore. For FY22, WeWork posted a revenue of Rs 784.44 crore.
WeWork IPO: Key risks that need to be accounted for
Like every business, the DRHP also lists out key risks in this business. These include—
1. Bulk of profit from Mumbai and Bengaluru
As per the DRHP, the revenue flow for the 6 months of FY25, FY24, FY23, and FY22 has one common point. Nearly 70% of the revenue is from net membership fees located in Bengaluru and Mumbai. That essentially means, any adverse developments affecting such locations and centres could have an adverse effect on the business and impact profitability too. As of September 2024, WeWork had 59 operational centres with a capacity of 94,440 desks n operational centres across 8 cities in India, of which Bengaluru and Mumbai contributed a significant portion.
2. Impact of macroeconomic headwinds
The other key factor that the DRHP outlines is the impact of global headwinds and macroeconomic developments on the business. Citing examples of the closure of centres in Gurugram and Mumbai in FY25, the company highlights that a slowdown in the growth of the market would directly impact the demand for flexible co-working spaces.
WeWork has listed several macroeconomic factors that might impact demand, including
-Global/domestic recession
-Lower infrastructure spending
-Reduction in purchasing power
-Inflation
-Ageing population
– Evolving job market demands
– Slowdown in job creation and the like.
These types of situations may lead to decisions to close certain centres.
3. Long-term lease agreements
Most of the lease agreements by WeWork India have a lock-in period ranging from 3-5 years for an initial term and varying durations thereafter. While the landlords are typically not permitted to terminate the lease agreements until the completion of the lock-in tenure, apart from a default, the company’s ability to terminate these lease agreements is also limited. After the primary lease tenure, these lease arrangements are renewed upon mutual agreement, and these rentals need to be irrespective of the fact whether the company manages to secure new members. Inability to attract new members on time, before the current ones exit, is crucial. Otherwise, it could affect the whole cash flow and make it difficult to honour the lease agreement.
4. Few landlords account for a significant percentage of lease agreements
Some of the top landlords account for more than 36% of the operational leasable area. This essentially means that any disruption in the relationship with these landlords could impact cash flows and operations. This may also constrain the company’s ability to negotiate agreements as per its terms and conditions.
5. Business dependent on ability to attract and retain new members
The overall WeWork model is dependent on the company’s ability to attract and retain members who continuously hire the facility for their needs. The company primarily generates revenue by charging membership fees for the use of workspaces within the centres. Normally, these agreements range from 1-3 years and extend up to six years. However, the risk of premature termination can’t be ruled out.