Smartworks Coworking Spaces IPO kicks off today: Should you subscribe to it?

The IPO of Smartworks Coworking Spaces (SCSL) kicks-off for bidding on Thursday, July 10 as the workspace solutions player is offering its shares in the range of Rs 387-407 apiece. Investors can apply for a minimum of 36 equity shares and its multiples thereafter, until Monday, July 14.

Smartworks is set to raise a total of Rs 582.56 crore via IPO, including a fresh share sale of Rs 445 crore and offer-for-sale (OFS) of up to 33,79,740 shares worth Rs 137.56 crore. The net proceeds from the issue shall be utilized towards repayment or prepayment of certain borrowings, Capital expenditure for fit-outs in the new centres and general corporate purposes.

Smartworks is well-positioned to benefit from India’s growing shift toward flexible, tech-enabled office spaces, driven by enterprise demand, cost optimization needs, and hybrid work adoption. With its pan-India presence, strong focus on enterprise clients, capital-efficient model, and inhouse tech capabilities, it is geared for scalable, profitable growth, said Arihant Capital.

“Backed by industry tailwinds and a sticky client base, Smartworks offers a compelling long-term opportunity in the evolving commercial real estate space. At the upper band price of Rs 407 the EV/Ebitda stands at 9.3 times. We have a ‘subscribe’ rating for the issue,” it added.

“We recommend subscribe to the issue due to its’ market leadership, robust financial trajectory over the last 3 years, high-growth ancillary services, and transition to hybrid leasing models position the company well to sustain above-industry growth,” said SMIFS, adding that Smartworks is positioned to capitalize on the growth trajectory of India’s flexible workspace market.

On the other hand, Ventura Securities has not rated the issue for not. “We would recommend to monitor PBT turning positive with economies of scale improving further,” it said. IPO proceeds will be used for partial pre-payment of certain borrowings and capex for fit outs in the new centers and for security deposits of the new centers, Ventura added.

Incorporated in 2015, New Delhi-based Smartworks Coworking Spaces is engaged in the business of customized managed workspace solutions, offering fully serviced, tech-enabled office environments with aesthetic designs and essential amenities to meet the specific needs of enterprises and their employees.

Among other analysts, Bajaj Broking noted that Smartworks operates with a high lease liability due to its long-term, fixed-cost lease agreements across multiple centres. As a result, it incurs significant interest expenses and depreciation charges under the ‘right-of-use’ (RoU) asset accounting treatment, in accordance with Indian accounting standards 116.

“This accounting structure impacts the Company’s Ebitda positively but results in elevated finance costs and depreciation expenses, thereby exerting pressure on its net profitability,” Bajaj Broking added.

On a net basis the company is generating loss due to heavy depreciation. Smartworks is valued at FY25 EV/Adj. EBITDA of 26.3 times, said SBI Securities. “We recommend investors to ‘avoid’ the issue and track the company’s performance post listing, especially focusing on its capital efficiency through variable rental business models and managed contracts.” it said.

Smartworks raised a total of Rs 173.64 crore from anchor investors as it allocated 42,66,378 shares at Rs 407 apiece. Its anchor book included names like Tata Mutual Fund, Baroda BNP Paribas, Trust Mutual Fund, Axis New Opportunities AIF – Series II, SBI General Insurance, Aditya Birla SL Insurance, Buoyant Opportunities Strategy II, Societe Generale, Sageone Flagship and more.

Smartworks serves mid-to-large enterprises, including Indian corporates, MNCs, and startups, offering modern campuses with design, technology, and amenities like cafeterias, gyms, crèches, and medical centers for employee well-being. It served 738 clients with 152,619 seats. It has 728 clients and 169,541 seats, with 12,044 seats yet to be occupied as of March 31, 2025.

Smartworks is also shifting to an asset-light strategy through variable rental and management contracts, improving capital efficiency. Additional revenue streams like value-added services and Fit-out-as-a-Service further strengthen its business, said Anand Rathi. “We believe that the IPO is fully priced and recommend a ‘subscribe for long term’ rating to the IPO,” it added.

For the financial year ended on March 31, 2025, the company reported a net loss of Rs 63.18 crore with a revenue of Rs 1,409.67 crore. It clocked a net profit of Rs 49.96 crore with a revenue of Rs 1,113.11 crore for the financial year 2023-24. Smartworks Coworking Spaces shall command a market capitalization of Rs 4,644.82 crore.

Smartworks has reserved shares worth Rs 3.75 crore for its eligible employees, who will get a discount of Rs 37 per share. Of the net offer, 50 per cent shares are reserved for qualified institutional buyers (QIBs), while non-institutional investors (NIIs) will have 15 per cent of allocation. Retail investors will have 35 per cent of allocation for the investors.

JM Financial, IIFL Capital Services, BoB Capital Markets and Kotak Mahindra Capital Company are the book-running lead managers of the Smartworks IPO, while MUFG Intime India (Link Intime) is the registrar for the issue. Shares of the company shall be listed on both BSE and NSE with July 17, Thursday, as the date of listing.