Whether or not they be start-ups trying to work nimbly with bodily areas, or corporates searching for ‘plug and play’ work options, or retailers contemplating appropriate areas, and even freelancers contemplating versatile workplace areas for a restricted interval, there are corporations catering to such necessities.
As a number one participant within the versatile working area phase, Awfis Area Options is the primary to return out with an preliminary public providing (IPO) of shares. The difficulty is open and is on the market for subscription until Might 27. The corporate is trying to increase a tad lower than ₹600 crore (OFS: Rs 470.9 crore; recent subject: 128 crore) on the higher finish of the value band (₹364-383). It gives coworking areas on hire and gives allied companies primarily, other than executing building and fit-out initiatives.
At ₹383, the Awfis Area IPO would commerce at 3.28 instances the NAV (web asset worth) as of 9MFY24 on post-offer diluted fairness base. There aren’t any listed friends within the area. The difficulty appears fairly priced, given the expansion trajectory of the corporate during the last three-odd years.
Income from FY21 grew at a compounded annual charge of 57 per cent until FY23 to ₹545.3 crore. EBITDA rose at 39.3 per cent over the identical interval to ₹176.1 crore in FY23. Within the 9MFY24, the revenues stood at ₹616.5 crore, whereas EBITDA was at ₹195.5 crore. The corporate is loss-making on the web stage, although losses have decreased significantly over the previous two years.
The return on capital employed (money EBIT divided by capital employed) has risen from a bit of over 10 per cent in FY21 to 49.9 per cent in 9MFY24.
A diversified shopper base, surge in chargeable areas, rise in occupancy, key deal with managed aggregation enterprise mannequin that reduces capex price necessities, the flexibleness to cater to mega and tiny purchasers, and a web debt-free steadiness sheet are positives for the corporate.
Buyers can subscribe to the Awfis Area Options subject with a long-term perspective, and never only for an inventory pop. The important thing monitorable issue would the trajectory in the direction of profitably on the web stage within the coming years.
Asset-light mannequin
Awfis Area Options is in 16 cities (together with seven tier-2 cities), reminiscent of Bengaluru, Mumbai, Chennai, Delhi, Pune, Kolkata and Hyderabad, amongst others. It has over 1.05 lakh seats and operates as many as 169 centres. It has a base of two,295 purchasers, a 3rd of which function in a number of centres, indicating a good diploma of buyer satisfaction.
In India, 74 per cent of the workspace provide is fragmented with non-institutional landlords. Subsequently, there’s a want for gamers reminiscent of Awfis to supply workspace options to purchasers with assorted necessities by taking these landlords onboard.
From ready-to-move workplaces, versatile tenures, allied infrastructure and upkeep companies, to simply giving entry to easy assembly rooms, day passes or digital workplaces, to customised workspaces, the corporate gives a gamut of options.
There are two fashions in versatile workspaces that corporations provide to purchasers.
Within the straight lease mannequin, homeowners of workplace areas lease them to operators reminiscent of Awfis. The phrases would come with the operator paying a set month-to-month rental, frequent space upkeep costs and a safety deposit There could be minimal lock-in intervals and escalation clauses. The capital expenditure for the match out (making empty workplace interiors prepared for occupation) is fully borne by the operator.
Nevertheless, Awfis is extra targeted on the managed aggregation mannequin the place the landlords incur a lot of the capital expenditure on fit-out with the operator having to take solely a small portion of the burden. Awfis works on a revenue or revenue-sharing mannequin with the area proprietor and offers a minimal assure solely from the fifth to thirteenth month of operations, until the contract expires.
In consequence, capex per seat works out to round ₹50,000, which is decrease than the ₹80,000 to ₹2 lakh that will in any other case be incurred by the corporate. The minimal assure is barely 45.88 per cent of the common micro-market rental and there aren’t any minimal assure obligations in 41.1 per cent of the centres.
Round 66 per cent of the seats of Awfis are on managed aggregation mannequin, whereas the others are on the straight lease mannequin as of December 2023 (46 per cent in March 2021).
This asset-light mannequin has helped enhance its RoCE and decreased the monetary threat attributable to low occupancy, other than decreasing the payback interval.
Diversified shopper base, wholesome metrics
Awfis has a well-diversified buyer base. As of December 2023, 68.6 per cent of its base was made up of corporates or MNCs, 19.8 per cent from SMEs and 10.9 per cent from start-ups. A tiny portion additionally comes from freelancers.
By way of industries, IT is the biggest, accounting for 46.3 per cent of the pie. Skilled companies, shopper & durables, healthcare & pharma and monetary companies account for 8-11.8 per cent every.
Occupancy ranges have elevated from 50 per cent in March 2021 to 75 per cent as of December 2023.
Additionally, within the largest seat cohort (greater than 100 seats), the weighted common tenure has risen from 27 months to 44 months. As a sign of purchasers wanting extra large-sized workplace areas from Awfis, the corporate has seen the 100-plus seats cohort improve contribution from 49.7 per cent as of March 2021 to 57.7 per cent as of March 2023.
The variety of seats has risen on the charge of fifty.2 per cent yearly from FY21 to FY23 whereas the chargeable space grew at 54.8 per cent in the identical interval.
Dependence on high purchasers has practically halved over FY21 to 9MFY24. Month-to-month churn charges have additionally decreased considerably.
The advance in key metrics and the strong shopper base and stickiness created depart Awfis Area Options in a snug area.
The addressable versatile workplace area market measurement in India is ready to be ₹47,400-59,200 crore by FY26, in accordance with a CBRE report. And 60 per cent of it’s managed by the highest 10 operators. The demand for seats in versatile workspaces is anticipated to develop at 25-29 per cent CAGR over 2019-2025 and contact 3.35-3.45 lakh seats. Thus, the long-term prospects for a number one participant reminiscent of Awfis appear strong.
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