Cult.fit IPO: Five Key Risks Investors Cannot Ignore

Cult.fit has filed its Draft Red Herring Prospectus (DRHP) for an IPO comprising a fresh issue aggregating up to Rs 950 crore and an offer for sale of up to 17.86 crore shares by existing investors. These include Temasek's MacRitchie Investments, Tata Digital, Accel and Kalaari Capital.

Here are five risk factors from the filing stand out:

1. Losses are narrowing but not gone. Cult.fit's loss for the year fell to Rs 251.9 crore in FY26 from Rs 480.8 crore in FY25 and Rs 888.5 crore in FY24. Adjusted EBITDA turned positive only in FY26, at Rs 144.8 crore. The DRHP itself cautions that "our historical performance may not be indicative of our future growth or financial results."

2. Auditors flagged data controls at premium centres. For three straight fiscals, the statutory auditors' report noted that "backup of books of account... with respect to sales at luxurious fitness centers and wellness studios were not maintained on a daily basis," and that they were unable to confirm whether the audit trail on third-party point-of-sale software "was enabled and operated throughout the year." The company expects the dependency to end by FY27.

3. Four cities carry the business. Delhi-NCR, Mumbai, Bengaluru and Hyderabad made up 90.44% of services revenue in FY26, up from 85.5% in FY24, per the filing's own city-wise breakup.

ALSO READ: Cult.fit IPO DRHP: Rs 950 Crore Fresh Issue, Hrithik Roshan Among Sellers, Key Risks — All You Need To Know

4. Franchisees run most of the network. Franchised and marketplace gyms formed 69.21% of total centres in FY26. The DRHP warns Cult.fit "exercise[s] limited operational or financial control over our franchises and marketplace gyms."

5. Statutory dues were not always paid on time. The filing discloses "certain instances of delays in payment of statutory dues" toward PF, ESI, TDS and GST across FY24-26. Separately, litigation worth about Rs 55 crore is pending against subsidiaries and roughly Rs 488 crore against directors, per the disclosed litigation table.

Improving unit economics anchor the pitch. Governance gaps, city concentration and franchise dependency are what warrant the closest scrutiny before the issue opens.

Other risks worth flagging

Goodwill on the books

The DRHP warns Cult.fit has "significant goodwill and intangible assets on our balance sheet, which may be subject to impairment," a legacy of past acquisitions including Gold's Gym and Fitness First.

Related party dealings

The filing discloses the company "has in the past entered into related party transactions and may continue to do so in the future," adding that it "cannot assure" such transactions will always be on favourable terms.

ALSO READ: Trent Shares Fall Nearly 10%: Why Is The Stock Getting Bent In Trade?

Debt-funded expansion

Cult.fit says it relies on "debt financing arrangement for a portion of our capital expenditure and working capital requirements," leaving it exposed to funding cost swings.

Seasonality caveat

The DRHP flags that "our business is subject to seasonality and our quarterly results published upon listing may not be indicative of our full year performance," a line aimed squarely at post-listing investors reading quarter one too literally.

Subsidiary-level losses 

Individual units, including Cultsport and Cultfit Healthcare, posted losses ranging between roughly Rs 18 crore and Rs 33 crore across FY24-26, per the restated financials, reinforcing that group-level profitability gains have not yet reached every arm of the business.

ALSO READ: Kaynes Tech, Syrma Top Jefferies Picks Over Dixon Tech In EMS Space 

Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.