Smartwork Coworking Spaces (SCSL), promoted by Neetish Sarda, Harsh Binani, and Saumya Binani is an office experience and managed campus platform. SCSL were the largest managed campus operator, amongst the benchmarked operators in terms of total stock of lease and managed space. It has 8.99 million square feet of super built-up area under lease and management across 50 centres in 15 cities with a seat capacity of 203118 as of March 2025.

Additionally as on June 30, 2025, it have signed non-binding letters of intent/MoUs with Landlords for an additional SBA of 1.46 million square feet across three Centres in Pune (Maharashtra), Kolkata (West Bengal) (partially handed over to the extent of 0.02 million square feet which has been excluded) and Mumbai (Maharashtra).

SCSL typically focus on leasing entire/ large, bare shell properties in prime locations from Landlords and transform them into fully serviced, aesthetically pleasing and tech-enabled Campuses with daily-life and aspirational amenities. SCSL not own the land and buildings/ properties at any of its centres.

As of March 31, 2025, SCSL is present across 14 Indian cities and in Singapore. The 28 key clusters identified across Tier 1 cities account for around 80% of total flexible workspace stock in these cities. The top four cities in which it operate, namely, Pune (Maharashtra), Bengaluru (Karnataka), Hyderabad (Telangana) and Mumbai (Maharashtra) constituted 75.19%, 80.07% and 77.85% of its rental revenue for the Fiscals 2025, 2024 and 2023, respectively. In FY25 rental revenue about 32.86% come from centres in Pune, 23.37% from Bengaluru, 11.65% from Hyderabad, 7.31% from Mumbai and balance 24.81% from other centres. Clients who typically require over 300 Seats accounted for 63.44% of its rental revenue in FY25 and clients with 101-300 seats accounted for 24.54% of rental revenue.

As of March 31, 2025, its operational centres served 738 clients occupying 152,619 Seats. Further, as on June 30, 2025, it had 728 Clients with 169,541 Seats, out of which 12,044 Seats were yet to be occupied at its operational centres by the respective Clients.

SCSL typically enter into agreements with its Clients, for periods ranging from two years to five years. While the agreements with clients have a lock-in period typically ranging from 12 months to 36 months, the clients may terminate such agreements on notice periods, typically ranging from three months to six months, post the expiry of their lock-in period. Client mix in-terms of industry IT/ITES was 42.28%, 9.63% engineering & manufacturing, 8.92% BFSI, 13.95% business consulting and others 25.22% in FY25. Enterprise clients accounted for 88.49% of rental revenue in FY25 and multi city clients accounted for 31.90% of rental revenue in FY25. Top 5/10/20 clients accounted for 12.52%/18.95%/27.76% of rental revenue in FY25.

In FY25 revenue from lease rentals accounted for 93.83% of the revenue with balance from ancillary & other services [2.53% from design/fitout services, 3.56% from ancillary services such as cafeteria/gym, meeting rooms etc]

It offer superior office experiences with aesthetically pleasing designs, by understanding its Clients’ functional requirements and preferences to offer customised solutions. The company equip its campuses with modern and aesthetically pleasing designs using its extensive design library, integrated proprietary technology solutions and amenities such as cafeterias, sport zones, smart convenience stores, gymnasiums, crèches and medical centres. Its centres offer clients’ employees a modern, attractive and aesthetically pleasing work environment. It cater to the clients’ needs of all team sizes, from under 50 to over 6,300 seats, with a specific focus on mid-to-large Enterprises having a requirement of over 300 Seats.

Typically its pricing strategy strives to achieve rental revenue from clients, which is at least double the lease rentals it owe to its landlords. As move forward, the company aim to strategically expand into the variable rental and management contract models as well.

The issue and objects of the offer

The issue comprise both issue of fresh equity aggregating to Rs 445 crore and offer for sale of 3379740 equity shares [800000 shares by promoters; 2579740 shares of Investor selling shareholders i.e. Space Solutions India]. Of the promoters offer for sale about 490000 by NS Niketan LLP, 310000 shares by SNS Infrarealty. Post issue the ISSH i.e. Space Solutions India will hold a stake of 19%.

Of the net proceeds from fresh issue, Rs 114 crore will be used for repayment/ prepayment/ redemption, in full or in part, of certain borrowings availed by the company; Rs 225.84 crore is towards capital expenditure for fit-outs in the New Centres and for security deposits of the new centres (“Capex”); and balance for general corporate purposes.

Total outstanding borrowings as on April 30, 2025, were Rs 381.967 crore, on a consolidated basis.

Strength

Largest managed campus operator, amongst the benchmarked operators in terms of total stock

Pan-India presence in key clusters, value centric pricing and its ability in leasing entire / large properties, make it a suitable partner for the Clients in the mid to large Enterprises.

Long-term contracts and continued relationships with large Enterprise Clients enable it to secure lease rental discounting at competitive rates from major financial institutions, using locked-in rental payments as a collateral. It also have also entered into long-term fixed cost lease agreements with landlords, for super built-up area of 8.99 million square feet.

Occupancy rate in operational centers in FY25 stand increased to 83.12% compared to 76.74% in FY23.

Typically enter into long term agreements with the Landlords as well as with the Clients. It follow a diversification strategy by typically not leasing more than 30.00% space in a Centre (over 0.15 million square feet) to a single client.

Weakness

The managed workspaces and flexible workspace industry in India is intensely competitive.

Clients may prematurely terminate their agreements and the company may not be able to attract new clients in sufficient numbers, which could adversely affect its business. Further may not have equal negotiating power with large clients (who have/require 300 seats plus) and it may be difficult for the company to find suitable replacements upon termination of agreements with such clients.

Derived 75.19% of its FY25 rental revenue from centres located in Pune, Bengaluru, Hyderabad and Mumbai. Any adverse developments affecting such locations and centres could have an adverse effect on business of the company.

Growth may be negatively impacted by macroeconomic factors, such as level of economic activity in the regions and cities in which the company operate, interest rate fluctuations and emergence of alternative destinations.

The company and certain of its subsidiaries have incurred losses and have experienced negative cash flows in the past.

Any failure to continually acquire more clients or pass on the potential increase in costs to its clients may result in the reduction of margins.

Equity Shares held by NS Niketan LLP and SNS Infrarealty LLP (both promoters) which were pledged in favour of Catalyst Trusteeship, the bond trustee, on behalf of Deutsche Investments India Private Limited, the bond holder and the pledge on the above mentioned Equity Shares has been released on July 2, 2025, prior to filing of this Red Herring Prospectus with the RoC. Any defaults in future including in compliance with the terms of the letter dated August 7, 2024, may result in promoters repledging their Equity Shares with the Security Trustee and may entitle the Security Trustee to invoke the pledge over their Equity Shares.

Statutory Auditors had provided a qualified opinion in consolidated audit report on internal financial controls for Fiscal 2023.

In the past the company, certain government agencies, Statutory Auditors and certain other persons had, received anonymous complaints about the company, associates, and some of its promoters, Neetish Sarda and Harsh Binani, and certain members of the Promoter Group.

Any defect in the title and ownership of the land and buildings/ properties or non-compliance of applicable law by Landlords in respect of its centres, may lead to adverse effect on business.

Valuation

Consolidated revenue was up 32% to Rs 1374.06 crore largely driven by increase in seat capacity (to 203118 seats as end of FY25 from 182228 seats in FY24) and occupancy rates. But with operating profit margin contract by 110 bps to 62.4%, the operating profit growth was restricted to 30% to Rs 857.26 crore. After accounting for lower other income, higher interest and depreciation cost, it was a loss of RS 79.46 crore at PBT level against a loss of RS 67.62 crore in the corresponding previous period. At PAT level it was a loss of RS 63.18 crore compared to a loss of Rs 49.96 crore in the corresponding previous period.

On a post IPO expanded equity (on upper price band) the EPS was –Rs 5.5. The price/BV is 8.4 times and the EV/sales for the company is 3.62 of its FY25 sales.

In comparison, Awfis Space Solutions (ASSL) grew at 42% in FY25 to a revenue of Rs 1207.54 crore with an OPM of 33.3%. ASSL manages more than 134121 operational seats across 208 operational centres in 18 cities with occupancy of established centres (>12 months) stand at 84% and blended stand at 73%. Including fit-outs the total seats increase to 152572 seats with chargeable area of 7.8 msf across 230 centres. ASSL quotes at PE of 107.5 times of its FY25 EPS. Its P/BV stands at 10 times and EV/sales 4.7 times.