Smartworks Coworking Spaces Limited — Q1 FY26 earnings call

Call held 12 Aug 2025

Management summary

Smartworks delivered a strong Q1 FY26, demonstrating robust revenue growth and significant margin expansion driven by increased occupancy and cost efficiencies. The company highlighted its asset-light, scalable model, and strong cash flow generation, positioning itself for continued growth and market leadership in the managed office space, with ambitious expansion targets for square footage and seat capacity.

Highlights

  • Revenue for Q1 FY26 stood at INR 3,792 million, marking a 21% year-on-year increase and 5.8% sequential growth.

  • Reported EBITDA was INR 2,410 million, up 25.5% YoY, with a margin of 63.6%.

  • Normalized EBITDA reached INR 607 million, a 109% YoY jump, with a healthy 16% margin.

  • Normalized PBT for Q1 FY26 was INR 168 million, a significant turnaround from a negative INR 102 million in Q1 FY25, and already exceeding FY25 full-year normalized PBT of INR 155 million.

  • Normalized Operating Cash Flow (OCF) generated INR 855 million, growing over 70% YoY from INR 501 million in Q1 FY25.

  • Operational area increased to 8.3 million square feet as of June 25, 2025, with occupancy at 83% and committed occupancy at 89%.

  • The company targets to increase its seat count from 190,000 to 275,000 within the next 4-5 quarters.

  • Capex cost per seat is approximately INR 60,000, fully borne by Smartworks, with a payback period of 32 months.

Key financials

  1. Revenue 3,792 Mn +21%YoY
  2. Reported EBITDA 2,410 Mn +25.5%YoY
  3. Reported EBITDA Margin 63.6%
  4. Normalized EBITDA 607 Mn +109%YoY
  5. Normalized EBITDA Margin 16%
  6. Normalized PBT 168 Mn
  7. Normalized OCF 855 Mn +70%YoY
  8. Reported PBT -56 Mn
  9. Normalized ROCE 13%

What they filed

Q1 FY27: revenue up 44.1%, net profit up 425.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue350 352 358 379 425 +21%472 +34%520 +45%546 +44%
EBITDA214 218 232 241 270 +26%306 +40%338 +46%346 +44%
Net profit-16 -16 -8 -4 -3 +81%1 +106%17 +313%13 +425%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Guidance & targets

Capacity

  • Annual square feet addition Capacity · every year · High confidence 2 million to 3 million square feet
    add 2 million to 3 million square feet of space every year by only taking 7 to 8 buildings

    — Harsh Binani

  • Total square feet under management Capacity · reach · High confidence 12 million square feet
    we already have visibility to reach 12 million square feet.

    — Harsh Binani

  • Total square feet (LOIs and term sheets) Capacity · further grow to · High confidence 12 million square feet
    This will further grow to 12 million square feet considering the LOIs and term sheets which we have signed.

    — Anirudh Tapuriah

  • Seats to be added (contracted for this year) Capacity · this year · High confidence 40,000 seats
    additional 26,000 seats, which is the 1 million square feet which is going to come in the next 2, 3 quarters. Both of that combined are about 40,000 seats which are going to get added this year which is already contracted for.

    — Neetish Sarda

  • Square feet added (contracted, revenue next year) Capacity · by the end of the year · High confidence 1.9 million square feet
    additional 1.9 million square feet of space which translates to 43,000 seats which we have already contracted for which is going to come by the end of the year and the revenues for that will be realized next year.

    — Neetish Sarda

  • Total seat count Capacity · within the next 4 to 5 quarters · High confidence 275,000 seats

    Previously 190,000 seats → 275,000 seats

    seat count increase from 190,000 seats to 275,000 seats within the next 4 to 5 quarters.

    — Neetish Sarda

  • Total seats added (this year pipeline) Capacity · this year · High confidence 45,000 seats
    total addition that you see will be for this year is about 45,000 seats, which is already there in the pipeline

    — Neetish Sarda

  • Annual seat addition Capacity · continue adding · High confidence 30,000 to 40,000

    Previously 25,000 to 30,000 seats → 30,000 to 40,000

    30,000 to 40,000 is what we'll be able to continue adding.

    — Neetish Sarda

Occupancy

  • Occupancy for new centers to breakeven Occupancy · within the first 12 months · High confidence 65% to 70%
    within the first 12 months, we aim to reach 65% to 70% occupancy and achieve breakeven.

    — Harsh Binani

Payback Period

  • Capex recovery Payback Period · steady-state ramp-up · High confidence 30 to 32 months
    recover our entire payback with a steady-state ramp-up of occupancy in about 30 to 32 months.

    — Harsh Binani

Revenue Mix

  • Rental annuity income from top six cities Revenue Mix · continue to come · High confidence 75%
    75% of rental annuity income will continue to come from the top six cities.

    — Harsh Binani

Client Concentration

  • Top 10 clients' share of revenue Client Concentration · continue to come down · High confidence less than 20%
    our top 10 clients currently account for less than 20%, this share will continue to come down.

    — Harsh Binani

Margin

  • Margin expansion Margin · second half of the year · Medium confidence rise
    as new centres mature over the second half of the year, occupancy and utilization will rise. Second, our margin will also expand through operating leverage in corporate and SG&A expenses.

    — Harsh Binani

Cash Flow

  • OCF to EBITDA ratio Cash Flow · steady state · High confidence 1.1 to 1.2
    OCF to EBITDA may go up to 1.4, in steady state, it will settle between 1.1 to 1.2, but will continue to stay above 1.

    — Harsh Binani

ROCE

  • ROCE growth ROCE · next 2 years · High confidence double
    in the next 2 years, we can double our ROCE, with further upside projected in the next five.

    — Harsh Binani

Capex

  • Growth without additional funding Capex · ongoing · High confidence 25% to 30% year-on-year
    in self-sustaining capex mode, which allows us to grow by 25% to 30% year-on-year without any additional funding.

    — Harsh Binani

Brokerage Expense

  • Brokerage expense as % of revenue Brokerage Expense · ongoing · High confidence less than 3%

    Previously 4% → less than 3%

    fiscal year '22, our brokerage expense was 4% of our revenue. It has already gone down to approximately 3% as our dependency on the brokerage system continues to go down.

    — Anirudh Tapuriah

Cost of Acquisition

  • Cost of acquisition Cost of Acquisition · ongoing · High confidence less than 3%

    Previously 4.5% → less than 3%

    reduce our cost of acquisition also significantly in the last... going down from 4.5% to less than 3% now.

    — Neetish Sarda

Growth Rate

  • CAGR (year-on-year) Growth Rate · ongoing · Medium confidence 30%-35%
    grow steady as we earlier mentioned at about a 30%-35% CAGR year-on-year.

    — Neetish Sarda

Debt

  • Gross borrowings Debt · next 2 years · High confidence very negligible
    gross borrowings have been continuing to go down year-on-year. And over the next 2 years, we practically see this number to become very negligible.

    — Harsh Binani

Risks & concerns

Areas of evasion (1)

  • Direct comparison with competitor's business model/efficiency

Q&A highlights

2 direct
Sustainability of low opex/capex and reduction in broker dependency Direct
Smartworks with its scale standardization has been able to reduce both our capex cost to INR 1,350 and our opex cost to INR 34 to INR 36 per square feet... our brokerage expense was 4% of our revenue. It has already gone down to approximately 3% as our dependency on the brokerage system continues to go down.

This question directly addresses the company's core competitive advantage (cost efficiency) and a potential risk (broker dependency), with management providing specific numbers and a clear strategy for sustainability and improvement.

Asked by Shivkumar Prajapati

Seat addition targets for FY26 and FY27 Direct
seat count increase from 190,000 seats to 275,000 seats within the next 4 to 5 quarters... total addition that you see will be for this year is about 45,000 seats... 30,000 to 40,000 is what we'll be able to continue adding.

This provides clear, quantifiable growth targets for capacity, which is a key driver for future revenue in the coworking space, offering investors a concrete metric to track.

Asked by Ayush Saboot

Comparison with competitor EFC Limited's efficiency and profitability Partial
what Smartworks has done. Our revenues are annuity incomes that come in. We have been constantly increasing... in FY '25, they stood at 12.5%. In the first quarter of FY '26, our adjusted EBITDA is already at 16%... normalized PBT for full year of fiscal year '25 stood at 155 million. And just for the first quarter of fiscal year '26, it stands at 168 million.

While not directly addressing the competitor's efficiency model, management used the opportunity to highlight Smartworks' own strong and improving profitability metrics, implicitly suggesting their model is robust.

Asked by Murgank

3 min read 7 chapters

Detailed narrative

Robust Q1 FY26 Financial Performance

Smartworks reported a strong Q1 FY26 with revenue reaching INR 3,792 million, a 21% year-on-year increase and 5.8% sequential growth. The company's reported EBITDA stood at INR 2,410 million, up 25.5% YoY, with a healthy margin of 63.6%. Normalized EBITDA saw a significant jump of 109% YoY to INR 607 million, achieving a 16% margin, reflecting strong operational efficiency and disciplined cost management.

Significant Turnaround in Profitability and Cash Flow

The company achieved a positive normalized PBT of INR 168 million in Q1 FY26, a substantial turnaround from a negative INR 102 million in Q1 FY25, and notably, this Q1 figure already surpasses the full-year FY25 normalized PBT of INR 155 million. Normalized Operating Cash Flow (OCF) also demonstrated robust growth, generating INR 855 million in Q1 FY26, a 70% increase from INR 501 million in the prior year's quarter, indicating healthy cash generation.

Aggressive Capacity Expansion and Occupancy Targets

Smartworks' operational area expanded to 8.3 million square feet as of June 25, 2025, translating to approximately 190,000 operational seats with an 83% occupancy rate and 89% committed occupancy. The company has visibility to reach 12 million square feet and targets to increase its total seat count from 190,000 to 275,000 within the next 4-5 quarters, with 45,000 seats already contracted for addition this year.

Enhanced Cost Efficiency and Asset-Light Model

Management highlighted its ability to maintain industry-leading cost structures, with capex costs at INR 1,350 per square foot and opex costs at INR 34-36 per square foot. The company spends approximately INR 60,000 per seat for fit-outs, fully borne by Smartworks, with a quick capex recovery period of 32 months. Brokerage expenses have reduced from 4% to approximately 3% of revenue, and the cost of customer acquisition has decreased from 4.5% to less than 3%.

Strategic Focus on Enterprise Clients and Annuity Revenue

The business model is heavily focused on enterprise clients, contributing around 90% of Q1 FY26 revenue, with 30% from multi-city clients. Lease rentals constitute 94% of total revenue, providing stability and predictability. The company aims to maintain 75% of rental annuity income from the top six cities and expects the share of its top 10 clients to continue to decrease from less than 20%, further de-risking its model.

Positive Outlook on Margins and ROCE

Smartworks anticipates continued margin expansion, driven by maturing new centers, rising occupancy, and operating leverage in SG&A expenses. The normalized EBITDA margin is expected to expand beyond the current 16%. The company projects to double its normalized ROCE from 13% within the next two years, with further upside potential over the next five years, supported by a strong cash ROCE of over 47%.

Net Debt Negative Position and Competitive Borrowing Costs

Following the IPO, where INR 3,965 million was raised net of expenses, Smartworks is now completely net debt negative. The company's cost of borrowing stands at a competitive 9%-10%, and management expects gross borrowings to become 'very negligible' over the next two years, further strengthening its financial position.

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