Smartworks Coworking Spaces Ltd. Q1 FY27 Earnings Call Summary

Event Participants

Executives

5
Anirudh Tapuriah (Chief of Strategy and Investor Relations), Harsh Binani (Executive Director), Neetish Sarda (Managing Director), Pratik Agarwal (Chief Business Officer), Sahil Jain (Chief Financial Officer)

Analysts

8
Devang Patel (Sameeksha Capital), Hitaindra Pradhan (Maximal Capital), Muralikrishnan (Sundaram Mutual), Shamit Ashar (Ambit Capital), Sourabh Gilda (JM Financial), Varun Julasaria (360 ONE Capital), Vikrant Kashyap (Asian Market Securities), Yashas Gilganchi (Bank of Baroda Capital Markets)

Financials & KPIs

Geographic & Segment Commentary

India (Core Market): Operational footprint of 10.4 million sq ft, the largest in the industry, serving 760+ clients including Fortune 500, MNCs, and Indian conglomerates, with 150,000+ professionals working from campuses. GCC clients contribute 21% of rental revenue (up from 15% in FY26), multi-city clients 35%, and the 1,000+ seater cohort 41%. Adding 2.5-3 million sq ft in FY27 with 3.5 million sq ft already signed, including Eastbridge Mumbai (8.15 lakh sq ft, world's largest standalone managed campus) and Eastside Pune, both landing in H2 FY27. No campus surrendered through any cycle since inception.

Singapore (International Expansion): Acquired Workstudio, bringing total to 1,500 seats (80,000 sq ft), approximately 2% of revenue. Existing centres running at ~88% occupancy with high profitability due to cost efficiency. Acquisition was opportunistic—at construction cost—funded entirely by Singapore cash flows. Adding 400-450 seats of fresh sellable capacity; only 1-2 more centres may be added, not a meaningful scale-up market. India cash flows deployed exclusively in domestic platform.

Company-Specific & Strategic Commentary

Building Pipeline & Forward Visibility: Every building needed for the next two years is already secured, and work on FY29 has begun. Over 3.5 million sq ft signed vs 2.5-3 million sq ft addition target, providing a 700,000-800,000 sq ft buffer against delivery delays. 1.9 million sq ft currently under fit-out. Institutional developer relationships (DLF, Hiranandani, Tata, Panchshil, Salarpuria) mitigate completion risk.

SmartVantage Platform & VAS: Soft-launched two quarters back; has already won two large contracts for services beyond seat revenue. Platform handles seats plus adjacent services for GCC clients; expected to meaningfully double revenue over next two years. VAS operates on take-rate basis with no expense on books—directly margin accretive. Non-lease rental revenue tripled from ₹22 crores to ₹68 crores YoY, though current projections don't factor in further VAS upside as verticals are still in pilot stage.

Pricing Power & Cost Leadership: Realization for mature capacity in Q1 FY27 at ₹181 per sq ft, up from ~₹170 per sq ft in FY26. Rental revenue at 2.2-2.3x rental cost at full occupancy. Closest competitor prices 10-15% higher, indicating headroom. Solar adoption and energy initiatives cutting costs across campuses. Large-scale deals (including Vikhroli acquisition among India's top 10 office space deals) secure preferred landlord terms.

Capital Allocation Philosophy: International growth self-funds from international cash flows; India cash flows deployed into domestic platform. Negative working capital model (six-day debtors) with tenant security deposit float income. Growth is self-funded by design; balance sheet virtually debt-free with net debt of ₹5.6 crores.

Client Mix Diversification: Consciously reducing IT/ITES concentration from 44% in FY24 to 35% in Q1 FY27, targeting 25-30/35%. Increasing penetration into manufacturing, engineering, business consultancy, and professional services. Sub-100 seat cohort expected to shrink by design as focus sharpens on larger annuity clients.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Singapore Acquisition - Rationale & Scale (Shamit Ashar, Ambit Capital)

• Question: What's the rationale behind the Workstudio acquisition, expected revenues/occupancy, and what is the targeted FY27 capex?
• Answer: Acquisition funded entirely from Singapore cash flows over the last year; acquired at construction cost for ~14,000-17,000 sq ft (Neetish Sarda). Existing Singapore centres at ~88% occupancy, adding 400-450 seats of sellable capacity. Singapore is ~1,500 seats and ~2% of revenue, meaningfully more profitable but will stay self-sustaining—India remains the capital allocation priority (Harsh Binani). Not scaling meaningfully—maybe 1-2 more centres, not doubling (Neetish Sarda).

FY27 Capex Outlay (Shamit Ashar, Ambit Capital)

• Question: What is the targeted capex outlay for FY27? Is the ₹1,350 per sq ft fit-out cost under inflationary pressure?
• Answer: Capex estimate of ₹550-600 crores for the year, including refurbishment capex (typically every 3 years) and fresh capex (Neetish Sarda). Significant capex cycle over next two quarters as committed occupancy at 88-90% leaves limited seats to sell; new acquisitions require fit-outs. Cost of ₹1,350 per sq ft escalates ~5% annually for inflation.

Speculative Expansion & Pre-commitment Levels (Yashas Gilganchi, Bank of Baroda Capital Markets)

• Question: How much of expansion is speculative—how much space is pre-spoken for when leasing from landlords?
• Answer: 30-35% of any new building gets pre-committed by existing Smartworks clients (Neetish Sarda). Historical ramp-up to 80-85% occupancy within 13-14 months, even for larger 600,000-700,000 sq ft buildings. Pre-commitment trend plus ramp-up trajectory will continue with new centres.

Tenant Roster & Client Mix Changes (Yashas Gilganchi, Bank of Baroda Capital Markets)

• Question: Any material change in tenant roster expected over FY27? Where is demand decreasing, which cohorts pick up?
• Answer: Demand coming from all sectors, but consciously diversifying risk (Neetish Sarda). IT/ITES reduced from 40%+ to 35%, targeting 25-30/35%; increasing manufacturing, engineering, business consultancy, professional services. 1,000+ seater cohort is primary engine—grown from 12% in FY22 to 41% (Harsh Binani). GCCs primary growth driver moving from 15% to 21% in one quarter; sub-100 seat cohort expected to shrink by design. Companies from Europe, US, Japan yet to set up India GCCs.

Occupancy Trajectory with 13M Sq Ft Target (Sourabh Gilda, JM Financial)

• Question: How does occupancy track as footprint approaches 13 million sq ft with two large H2 centres?
• Answer: 7-8 centres across different cities under construction with healthy demand in every location (Neetish Sarda). Occupancy may see brief volatility from new centre additions, but mature centres at 90%+ occupancy. Effective occupancy of 80-85% expected through next three quarters despite high growth.

Seat Retention - Churn Backed by Demand? (Sourabh Gilda, JM Financial)

• Question: Is the 74% retention drop demand-backed? Will similar opportunities span out?
• Answer: Not a standalone concern—committed occupancy at 92% for mature centres (Neetish Sarda). Certain clients from 4-5 years ago at lower base are being churned out; replacement customers already found. Retention is seasonally lower in H1 as renewal decisions cluster in first two quarters; FY26 annual retention ended at 80-88%. "Committed occupancies are very wealthy and healthy."

GCC Growth & SmartVantage Platform (Vikrant Kashyap, Asian Market Securities)

• Question: Is the GCC improvement from the SmartVantage platform? How does it improve revenue per month?
• Answer: GCC is primary growth driver for next 2-3 years with diversity across sectors and geographies—Swiss bank, Japanese NBFC GCC, European and Japanese demand (Harsh Binani). SmartVantage won two large contracts for services beyond seats; revenue expected to meaningfully double over two years. Impact not yet in P&L—GCC offices under fit-out or just handed over; service revenue accretion will show in 2-3 quarters (Neetish Sarda).

Supply-Side Visibility & Completion Delays (Muralikrishnan, Sundaram Mutual)

• Question: Any issues adding seats given reports of completion delays?
• Answer: Supply risk is very low—growing 2.5-3 million sq ft requires just 7-8 buildings a year (Neetish Sarda). 3.5 million sq ft signed vs 2.5-3 million target = 700-800k sq ft buffer; any delayed project gets compensated by another asset. Partnering with marquee institutional developers like DLF, Hiranandani, Tata, Panchshil, Salarpuria who deliver on schedule (Harsh Binani). 1.9 million sq ft currently under fit-out (Anirudh Tapuriah).

Revenue Guidance & Per Sq Ft Realization (Varun Julasaria, 360 ONE Capital)

• Question: What per-square-foot rate is modelled for additional revenue? Shouldn't growth be higher given 22% is already committed?
• Answer: Realization for incremental seats in mature footprint in Q1 FY27: ~₹181 per sq ft (Anirudh Tapuriah). On occupied basis, realisation is 2.1-2.2x cost; at full occupancy 2.2-2.3x rental cost (Neetish Sarda). Guidance of 28-30% is conservative and confident—committed occupancy at 92% means little to sell on existing base; new centres take 4-5 months to build and ~12 months to ramp, with jumps expected in Q3-Q4.

OCF to EBITDA Dip Explanation (Varun Julasaria, 360 ONE Capital)

• Question: Why did OCF to EBITDA decline? Was working capital favourable?
• Answer: Dip driven by ₹33 crores security deposit paid to landlords to book buildings through FY28 and partially FY29 in prime locations (Harsh Binani). Structurally, business remains negative working capital with six-day receivables and float income from tenant security deposits. Momentary dips expected as supply is secured for future growth.

Capex Granularity - Refurb vs New Fit-outs (Hitaindra Pradhan, Maximal Capital)

• Question: How does refurb capex compare with new fit-out capex?
• Answer: New capex at ₹1,350 per sq ft, increasing 5% annually for inflation (Neetish Sarda). Refurbishment capex ~15% of initial capex, incurred every three years. Context: FY26 total capex outflow was ₹388 crores; footprint grew from 8.1 million sq ft (FY25) to 10.1 million (FY26), with 2.5-3 million sq ft addition guided for FY27 (Anirudh Tapuriah).

IT/ITES, Call Centres & AI Impact (Devang Patel, Sameeksha Capital)

• Question: What is the share of call centres within IT/ITES? Any renewal impact from AI?
• Answer: No classification below IT/ITES; call centres are not a significant number (Neetish Sarda). 74% retention shows most clients stayed, and committed occupancy at 92% proves replacements for non-retained space. IT/ITES trajectory: 44% (FY24) → 42% (FY25) → 39% (FY26) → 35% (Q1 FY27); other sectors growing faster (Anirudh Tapuriah).

GCC Margin/ROCE Accretion & Pricing Power (Devang Patel, Sameeksha Capital)

• Question: Is GCC revenue yield/ROCE accretive? Is it already pulling up ROCE?
• Answer: Any client entering the ecosystem is value accretive, not just GCCs (Neetish Sarda). SmartVantage services margin will take 2-3 quarters to hit numbers as offices are still being built out. Pricing opportunity exists: closest competitor is 10-15% higher despite Smartworks' 19.6% margin. Mature capacity realization increased from ~₹170 (FY26) to ₹181 per sq ft (Q1 FY27) (Anirudh Tapuriah). Growth in both volume and value will achieve annual projections.

Landlord Terms & Institutional vs Non-Institutional Mix (Shamit Ashar, Ambit Capital)

• Question: Are new institutional landlord deals coming at better terms? Will mix shift?
• Answer: Scale and volume of deals—including Vikhroli acquisition among India's top 10 largest office deals—command preferred terms (Neetish Sarda). Institutional landlords now see Smartworks' track record and fill-up capability; confidence is rising. Current mix ~65% non-institutional vs 35% institutional; expected to broadly continue over next few quarters/years.

VAS Offering & EBITDA Margin Impact (Muralikrishnan, Sundaram Mutual)

• Question: Is VAS to increase stickiness? How does it impact EBITDA margins?
• Answer: Non-lease rental revenue tripled from ₹22 crores to ₹68 crores YoY, mostly VAS-driven (Neetish Sarda). VAS is largely recurring (food programs, building-level services) and operates on a take-rate model—no expenses on Smartworks' books, so directly margin accretive. VAS focus is only three quarters old with limited services; further upside not factored into FY27 projections as verticals are under pilot. "We don't manage for the quarter; we are building for the decade" (Harsh Binani).

Key Takeaway

Smartworks delivered a 44% YoY revenue growth to ₹546 crores in Q1 FY27, with normalized EBITDA up 74% to ₹107 crores (19.6% margin, +340 bps YoY) and PAT nearly tripling to ₹39 crores, driven by centre maturation, existing client expansion (multi-city clients at 35% of revenue), and GCC-led demand (21% of revenue, up from 15% in FY26). The company entered its heaviest capex cycle—FY27 capex guided at ₹550-600 crores—to fund 2.5-3 million sq ft of new supply (3.5 million sq ft signed, including the world's largest managed campus in Mumbai), while ROCE held at 21.5% and net debt stayed at just ₹5.6 crores. Management reaffirmed FY27 guidance of 28-30% revenue growth, 19-20% EBITDA margins, and >13 million sq ft operational area by March 2027, anchored by ₹5,400 crores of contracted revenue covering 87% of FY27. The strategy centers on consolidating flex market leadership (top 10 operators at 74% of Flex leasing), deepening GCC penetration through the SmartVantage platform, and maintaining pricing power (₹181 per sq ft realization, 10-15% below closest competitor). Key watch points include occupancy dilution from new centre ramps (overall 81% vs mature committed 92%), deliberate portfolio churn at renewals (74% retention), and cash flow dips from security deposits for FY28-29 buildings; management expects ROCE to expand meaningfully through FY28 as the capex cohort matures.