Smartworks Coworking Spaces IPO Opens: 'Subscribe For Long-Term' Says Geojit — Here's Why

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Geojit Report

Smartworks Coworking Spaces Ltd.'s IPO opened today for subscription and the offer closes on July 14. An office experience and managed Campus platform company has fixed the price band in the range of Rs 387-Rs 407 Apiece.

Investors can place bids starting from a minimum of 36 shares and in multiples thereafter.

JM Financial Ltd., BOB Capital Markets Ltd., IIFL Capital Services Ltd., Kotak Mahindra Capital Company Ltd. are the book-running lead managers for the public issue.

The shares will be listed on both the National Stock Exchange and the BSE on July 17.

Purpose of IPO

The issue consists of a fresh issue of Rs 445 crore and an offer for sale of Rs 137.6 crore totalling to Rs 582.6 crore. The net proceeds from IPO will be utilised for repayment/prepayment, in full or in part, of certain borrowings availed by the company (~Rs 114 crore), capital expenditure for fit-outs in new centers and for security deposits of new centers (Rs 226 crore) and general corporate purposes.

Key Risks

Revenue concentration: Despite pan-India presence, ~75% of revenue (FY25) is derived from centers in four regions (Pune, Bengaluru, Hyderabad and Mumbai).

Adverse macroeconomic trends or a slowdown in the IT sector could affect Smartworks Coworking Space’s business performance.

Key strategies:

1. Smartworks intend to capitalise the market leadership, learnings, and expertise to further scale their core business.

2. Enhance capital efficiency through variable rental business model and managed contracts.

3. Scale up the new revenue streams, which are margin-accretive.  Continue to build proprietary technology to improve operational efficiency and create opportunities for monetisation.

4. To become a sustainable company.

Valuations

Given its asset-light business model, capital efficiency through variable rental and management contracts, and the scale up of new revenue streams (like value-added services and fit–out as a service), which are margin accretive, further strengthen the business going forward.

Hence, we recommend a ‘Subscribe’ rating on a long-term basis.

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