Awfis Space Solutions IPO Review

Awfis Space Solutions IPO Review: Awfis Space Solutions is facing an IPO issue of Rs. 598.53 Cr opens on May 22, 2024. The issue closes on May 27 and will be listed on the exchange on May 30, 2024. In this article, we will analyze the strengths and weaknesses of Awfis Space Solutions IPO Review 2024. Read on to find out. !

Awfis Space Solutions IPO Review – Company Overview

Apis Space Solution It is India’s largest flexible workspace solutions company. The company is present in 16 cities in India and also reaches the largest number of smaller markets in the country, ranking first among the top five companies benchmarked in the flexible workspace segment.

The company has a total of 169 centers across 16 cities in India, covering a total area of ​​5.33 million sq ft and a total seating capacity of 1.05 Lakh. Of the 169 centers, 31 centers and 25,312 seats are equipped with integrated paid areas. 1.23 million square feet

Additionally, the Company has signed Letters of Intent (“LOIs”) with space owners for 13 additional centers, totaling 10,859 seats over 550,000 square feet.

As of December 31, 2023, Awfis has over 2,295 customers and is present in 52 micro markets in India. The company offers a wide range of flexible workspace solutions, from individual flexible desk requirements to bespoke office space for startups, small and medium-sized enterprises (SMEs), large corporations and multinational corporations.

Flexible workspace solutions accommodate a variety of seating groups, from single to multi-seat, with contracts available from one hour to several years.

Over time, Awfis has evolved from a co-working space into a unified workspace solutions platform. Our core solutions are coworking solutions, including flexible workspaces, custom office spaces and mobility solutions.

The entire Awfis workspace solutions platform can be visualized in the diagram below.

Awfis Space Solutions IPO Review – Industry Overview

The COVID-19 pandemic has led to a degree of workforce migration, with employees seeking greater flexibility, decentralizing operations across multiple organizations, and increasing demand for hub-and-spoke models and flexible workspaces. . has increased.

Additionally, with the demand for flexible workspaces booming, the penetration level of the flexible workspace segment in the office space (non-SEZ) sector surged by around 39% from 9% to 12.5% ​​in 2020.

The penetration of flexible workspace segment in India’s office space (non-SEZ) sector is expected to increase to approximately 15.5% by 2026. The demand for seating in flexible workspaces has been continuously increasing over the past 3-4 years, growing at a CAGR of 30-40% from 2019 to 2021.

Seat occupancy is increasing at a CAGR of approximately 42% from approximately 59,000 to 69,000 seats per year in 2019 to approximately 167,000 to 177,000 seats per year in 2022, and is expected to reach 335,000 to 345,000 seats per year in 2026.

The IT, technology and software development sectors have been the main demand drivers for flexible workspace over the past three to four years, followed by banking, financial services and insurance (BFSI), which has also seen an increase in demand for flexible workspace. Workspace operator over the years.

Additionally, the overall market size of the flexible workspace segment has more than tripled in Tier over the past three to four years from over 20 million sq ft prior to 2019 to approximately 62 million sq ft as of December 31, 2023. 1 city.

Awfis Space Solutions IPO Review – Financials

Awfis Space Solutions gets 77% of its FY23 revenue from co-working space rentals. Awfis Workspaces has significantly reduced its exposure to this segment as it contributed nearly 91% of its revenue in FY21.

The company’s second largest revenue generator turned out to be construction and facility projects, shared office space customized to suit the needs of large clients. This contributes approximately 24% of the company’s revenue, up from 6.4% in FY21.

In FY23, Awfis reported total revenue of Rs. 545 Cr, an increase of 112% from Rs. 257 Cr in FY22. The company is growing at a CAGR of 75% since FY21. Most of the growth came from increased rental of workspace. The construction and facilities sector performed slightly better than plain vanilla leases.

If we talk about profitability, the company is not profitable yet. In FY23, Awfis Space Solutions reported a net loss of Rs. 47 Cr down due to loss of Rs. 57 Cr in FY22. As a result of increased sales without increasing profits, net profit margin fell from -20.51% to -8.24% in FY23.

Awfis Space Solutions IPO Review – Key Players

Awfis Space Solutions does not have any peers listed on Indian exchanges and therefore cannot be compared to its peers.

Company Strengths

1. Leadership in a large and growing market: The overall addressable market for flexible workspace operators presents a sizable opportunity. Awfis Space Solutions is already the market leader and continues to expand to increase its share.
2. Innovative business model: Companies are shifting from the traditional approach of landlords renting out entire office buildings and providing individual spaces to a more collaborative approach.
3. Strong demand and diverse customer base: The company has a strong customer base of 2,295 customers and sold a whopping 36,020 seats in FY23. Awfis’ top clients contribute only 3% of FY23 revenue, with its top five clients bringing in just 13%.
4. Acquire and retain customers: In FY23, 62.86% of seats sold were through direct channels. This means that sales were completed without broker involvement, with 37.14% of seats sold going through brokers. Sales and marketing efforts resulted in 80% of the centers being filled within 7.15 months of launch.
5. Portfolio of reputable space owners: Office space owners range from large real estate developers to HNIs, family offices and other funds. Notable names include Prestige Estates Ltd, Nyati Projects Landmark, Vajram Holdings, etc.

company’s weaknesses

1. Loss factors: Awfis Space Solutions continues to incur losses. Although the company’s revenue has doubled over the past few years, it has made no difference in terms of profitability.
2. Negative Cash Flow: Over the past three years, the Company has experienced negative cash flow due to its investing and financing activities. This is because the company is growing quickly and has more cash outflow than inflow.
3. Inability to sustain strong revenue growth: The company’s revenue growth has been at a superficial pace, and this pace may not continue in the coming years.
4. Impact of macroeconomic factors: Demand for corporate office space also depends on other macroeconomic factors, such as growth in IT, professional services and other industries. Any disruption to this could have serious implications for Awfis’ finances.

Awfis Space Solutions IPO Review – GMP

Shares of Awfis Space Solutions were trading at a premium of 20.89% in the gray market on May 16, 2024. The stock in Gray Market was trading at Rs 463. This gives a premium of Rs 80 per share to the ceiling price of Rs 383.

Awfis Space Solutions IPO Review – Key IPO Information

promoter: Amit Ramani and Peak XV Partners Investment

Book Operations Lead Manager: ICICI Securities Ltd, Axis Capital Ltd, IIFL Securities Ltd and Emkay Global Financial Services Ltd

Proposal registered by: Bigshare Services Pvt Ltd

purpose of the problem

1. Rs 42 Cr will be utilized to finance capital expenditure for setting up the new centre.
2. 54 Cr utilized towards working capital requirement of Rs.
3. The remaining proceeds will be utilized for general corporate purposes.

conclusion

Awfis Space Solutions is India’s largest flexible workspace solutions company, operating 169 centers across 16 cities. The company saw strong sales growth, with sales more than doubling. 257 crore in FY22 to Rs. $54.5 billion in fiscal year 23. However, the company continued to record losses, recording a net loss of 50 billion won. 23 years, $4.7 billion.

Given Awfis’ leadership position in the large, growing market for flexible workspace, the IPO appears attractive. The company’s strengths include innovative business models, a strong and diverse customer base, effective customer acquisition and retention strategies, and a portfolio of reputable space owners.

On the other hand, the company’s inability to achieve profitability, negative cash flow due to rapid expansion, and dependence on macroeconomic factors affecting office space demand are key weaknesses to consider. Overall, IPOs provide an opportunity to invest in market leaders in the flexible workspace sector.

Written by Nasir Hussein

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