WeWork IPO: A Coffee Day Fraud Likely Behind Delayed Debut — NDTV Profit Exclusive

A months-old case against a former chief executive of Embassy Office Parks REIT might be the reason why WeWork India's market debut is still on hold.

While reviewing the draft papers of Embassy-backed WeWork India, the Securities and Exchange Board of India is said to have taken note of delayed exchange disclosures from the other listed entity that is backed by the Embassy Group — Embassy Office Parks. The concerns pertained to a case involving ousted CEO Aravind Maiya, which led the regulator to flag the promoter's compliance standards, two people aware of the matter told NDTV Profit.

The REIT is now working with SEBI to address the issues, and WeWork's initial public offering is likely to get cleared once an internal resolution is reached, one of the two people quoted above said on the condition of anonymity.

The market regulator might also look to formally close the case involving Maiya ahead of the IPO, though this might not be followed through, the other person added.

The IPO for WeWork may get approved by the end of June 2025 if things work out in favour of the promoters, a third person said. SEBI is yet to indicate any timeline for closure.

NDTV Profit has reached out to SEBI, WeWork India and Embassy REIT for comments on the story.

In November 2024, SEBI had directed Embassy Office Parks Management Services, the manager of the REIT, to immediately suspend Aravind Maiya as CEO following findings from the National Financial Reporting Authority.

The NFRA findings identified negligence on Maiya’s part during his previous role in auditing Coffee Day Enterprises Ltd. 

SEBI’s order, issued as a temporary measure, required the company to appoint a new CEO for the time being who met the "fit and proper" criteria essential for leadership positions in SEBI-regulated entities. The suspension was to remain in effect until further instructions were issued.

This decision is related to SEBI’s investigation into violations within Coffee Day Enterprises, the parent company of Cafe Coffee Day, where funds were allegedly diverted to a related entity, Mysore Amalgamated Coffee Estates Ltd., without necessary corporate approvals.

The findings indicated a fund diversion of over Rs 3,000 crore to Mysore Amalgamated — a company linked to the late CDEL founder VG Siddhartha. The fund diversion was found to have been concealed from Coffee Day’s investors, leading to considerable losses in share value upon the fraud’s revelation.

During this period, Maiya was a partner at the auditing firm responsible for Coffee Day’s financial compliance. The NFRA cited that the audit process had failed to adequately detect or disclose these major financial irregularities.

SEBI found that Maiya’s oversight in the audit process, compounded by NFRA’s findings of "gross negligence", rendered him ineligible to continue as CEO under SEBI’s "fit and proper" requirements.

Currently, an Embassy-backed promoter holds a 73.8% stake in WeWork India, while another holds 51% in the REIT's manager.

WeWork India's draft red herring prospectus from late January 2025 mentions the interim order from November 2024 as an internal risk. And while Embassy Office Parks Management Services had "filed a settlement application dated December 6, 2024, in this regard with SEBI, the matter is currently pending", the DRHP read.

SEBI's concerns over late disclosures were highlighted by the REIT in an exchange disclosure from May 31, where it announced to be in receipt of a show cause notice over non-compliance with listing regulations.

The notice alleged that Embassy REIT's manager delayed the disclosure of the NFRA order by 53 days, the manager’s view on the "fit and proper" status of Maiya by 35 days, and a SEBI letter dated Oct. 8, 2024, by 11 days. The notice also alleged failure of the REIT's trustee, Axis Trustee Services Ltd., in overseeing the manager's compliance.

"The manager will take appropriate steps, including providing a timely response to the SEBI," Embassy Office Parks Management said in a notice on Saturday. "At this stage, it is difficult to ascertain the financial impact, if any, until the conclusion of the matter."

Now, Embassy Group is working with SEBI to iron out any irregularities to ensure the DRHP gets moving, the abovementioned people said.

WeWork's IPO will be a pure offer-for-sale, according to the DRHP. Embassy Buildcon LLP and WeWork Global affiliate 1 Ariel Way Tenant Ltd. will be offloading up to 4.4 crore shares.

Since this is a pure OFS, the company will not get any funds from the IPO.

JM Financial Ltd., ICICI Securities Ltd., Jefferies India Pvt., Kotak Mahindra Capital Co., and 360 ONE WAM Ltd. are appointed as the lead bankers for the offer.