Kotak Initiates Coverage On Smartworks, Bets On Flexible Workspace Boom — Check Target Price
Kotak notes that flexible operators now account for nearly one-third of incremental leasing activity in India’s commercial real estate market.
Kotak Institutional Equities has initiated coverage on Smartworks Coworking Space with a 'Buy' rating. This signals a renewed confidence in India’s flexible workspace story as commercial real estate adapts to hybrid work and cost-conscious occupiers.
Kotak has assigned a Discounted Cash Flow (DCF)-based fair value of Rs 600, implying meaningful upside from the current market price of around Rs 506. It also frames Smartworks as a 'rebooted' commercial real estate play rather than a typical coworking operator.
Scale First, Margins Next
At the core of Kotak’s thesis is scale. Smartworks is already among India’s largest flexible workspace operators, with 9.1 million sq ft of operational area and a leased footprint of over 10.3 million sq ft as of late 2025. The brokerage expects operational area to expand to 14.5 million sq ft by FY28, driven by steady additions of 2-3 million sq ft annually.
This expansion, combined with operating leverage, underpins Kotak’s expectation of a 38% CAGR in adjusted EBITDA between FY25 and FY28.
Margins are projected to improve by 380 basis points, taking EBITDA margins to around 16% by FY28, as occupancy stabilises and fixed costs get absorbed over a larger base.
Why Flexible Workspaces Matter Again
Flexible workspaces are emerging as a key beneficiary of changing office demand patterns. Kotak notes that flexible operators now account for nearly one-third of incremental leasing activity in India’s commercial real estate market.
Hybrid work models, shorter lease tenures, and a preference for managed offices are pushing enterprises—especially mid-to-large corporates, MNCs, and fast-growing startups — towards operators like Smartworks.
Valuation: Expensive, But With Backing
On headline multiples, Smartworks may look optically expensive. The stock trades at around 16x FY27E EV/adjusted EBITDA, rising to 19x on FY27 EBITDA, according to Kotak’s estimates.
However, the brokerage argues these valuations are justified by the company’s strong growth visibility, improving cash flows, and increasing institutionalisation of the coworking sector.
Kotak expects operating cash flows to exceed EBITDA over the medium term, aided by security deposits on new leases and improving unit economics as Smartworks achieves critical scale.
What Could Go Wrong?
The risks are clear. Any inability to maintain occupancy levels—currently blended at around 83% — or delays in sourcing new real estate could hurt profitability.
A slowdown in office absorption or slower adoption of flexible workspaces by large enterprises also remains a key downside risk.
