Backed by a near doubling of revenues in a post-Covid world where ‘back to the office’ is picking up, Smartworks, the country’s largest managed office space provider, is looking at three-fold growth as it looks to ramp up to 25 million square feet (msf) of space over the next four-to-five years.
The company currently manages over 8 msf of space, across 14 cities that include Delhi, Gurugram, Noida, Kolkata, Bengaluru, Jaipur, Indore, Mumbai, Hyderabad, Chennai, Pune and Ahmedabad. It plans to expand operations in more cities including Kochi and Coimbatore.
Revenues in FY23 were ₹ 750 crore, up from ₹ 390 crore in FY22. The company expects to close FY24 with revenues of ₹1200 crore. Earnings before interest, tax, depreciation and amortisation (EBITDA) margin was ₹ 100 crore in FY23 and is eyeing doubling it to ₹200 crore in FY24.
“In the next five-odd years we should be upping our managed space area to 20-25 msf -odd, driven primarily by an increase across the top nine, including Tier-I cities, “ Neetish Sarda, Founder,Smartworks, told businessline.
He explains that big corporates and GCCs (global capability centres) are committing to large deals where seat capacities at a single location is going upwards of 300-350.
Rentals going up to pre-Covid levels of ₹70 - 72 per sq ft and is expected to reach ₹80 - 82 per sq ft (at least to $1) over the next 2-3 years.
Compared to India, global rental spreads are costlier at $ 8-9 per sq ft in Singapore and at $ 4-5 per sq ft in Dubai and Phillipines, making the country a far attractive proposition for GCCs.
Changing Business Model
Sarda explains that a change in business model has also worked on favour of the flex space provider. In 2021, the company switched to a ‘campus-managed solutions’ model, which means managing large independent campus-like structures as opposed to independent floors in a building or a complete building which coworking players usually take up to run operations. Taking up larger space meant it could provide flexibility to the enterprises that were now looking for more options and services for their employees.
Second, it also helped Smartworks negotiate on its capex and add more amenities which made sense post the pandemic.
Third, it helped Sarda to offer standardisation in services.
“For instance, we are now adding on adjacencies like cafe services, gyms, and so on, which have started generating revenues. We have got into designing as service vertical which is at a pre-revenue stage, whereas the tech vertical is generating ₹ 60 crore of gross merchandising value,” says Sarda.
According to him, the company raised growth funds to the tune of $ 40 million in 2020. And would look to explore “options” as need arises.
“We continue to explore profitable growth and re-invest our free cash. Maybe when we reach that stage, an IPO could be explored. Right now to reach that IPO stage we may explore funding for growth capital. We have some bandwidth right now, “ Sarda said.