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    Smartworks Coworking Spaces Q1 FY27 earnings call

    SMARTWORKS
    Services·22 Jul 2026
    Management Summary

    Smartworks delivered a robust Q1 FY27, marked by strong revenue and EBITDA growth, and significant margin expansion. The company continued its operational expansion, reaching 10.4 million sq ft, and strategically diversified its client base towards GCCs and larger cohorts. While operating and free cash flows were impacted by strategic investments in future capacity, ROCE improved, and the balance sheet remained virtually debt-free. Management reaffirmed its FY27 growth and margin guidance, emphasizing a self-funded growth model and strong future visibility.

    Highlights

    5

    • Revenue grew 44% year-on-year to INR 546 crores and 5% quarter-on-quarter, demonstrating strong top-line expansion.

    • Normalized EBITDA increased 74% year-on-year to INR 107 crores and 8% quarter-on-quarter, with margins expanding from 19% to 19.6%.

    • Normalized PAT nearly tripled from INR 13 crores in Q1 FY26 to INR 39 crores this quarter, reflecting enhanced profitability.

    • ROCE improved to 21.5%, up 870 bps year-on-year, despite significant capital deployment.

    • GCC clients now contribute 21% of revenue (up from 15% in FY26) and the 1,000+ seater cohort contributes over 41% (up from 37% in FY26), indicating a shift towards larger, higher-value clients.

    Concerns

    3

    • Operating cash flow to EBITDA was 0.9x this quarter, below the structural target of 1x, primarily due to INR 33 crores in security deposits paid for future buildings.

    • Free cash flow was negative INR 56 crores, compared to negative INR 4.9 crores a year ago, attributed to a stepped-up capex cycle.

    • Overall occupancy slightly decreased to 81% from 82% in Q4 FY26, a function of newly opened buildings still filling up.

    Key financials

    Single quarter

    09 metrics
    1. 01Revenue₹546 Cr+44%YoY
    2. 02Normalized EBITDA₹107 Cr+74%YoY
    3. 03Normalized EBITDA Margin19.6%
    4. 04Normalized PAT₹39 Cr+2%YoY
    5. 05ROCE21.5%

    Capital allocation

    4
    high confidence
    CategoryHeadline
    Capex

    ₹150 crores this quarter · ₹550 crores (FY27) planned

    International growth funds itself from international cash flows, while India cash flows are deployed into the domestic platform.

    Debt

    Net ₹5.6 crores

    Cost 9.0%

    M&A

    Workstudio

    acquisition · closed

    Liquidity

    Liquidity disclosed

    Negative working capital model with roughly six days debtors. Growth is self-funded by design, primarily from internally generated cash.

    Guidance & targets

    8
    CategoryTargetPriority
    Revenue
    Revenue Growth
    28% to 30%
    		High
    Revenue
    Committed Contracted Revenue
    INR 5,400 crores
    		High
    Revenue
    VAS Revenue Growth
    meaningfully double
    		Medium
    Profitability
    Normalized EBITDA Margins
    19% to 20%
    		High
    Capacity
    Operational Footprint
    Over 13 million square foot
    		High
    Capacity
    New Operational Space Addition
    2.5 to 3 million square feet
    		High
    Occupancy
    New Center Ramp-up Occupancy
    80-85%
    		High
    Client Mix
    IT/ITES Client Contribution
    25% to 35%
    		Medium

    What to watch in Q2 FY27

    5

    Overall Occupancy Trend

    Next quarter
    Current81% (vs 82% in Q4 FY26)
    TargetStabilization or improvement towards 80-85% range

    Why it matters

    Indicates successful ramp-up of new centers and demand absorption, crucial for revenue growth.

    As far as occupancies are concerned, there might be a quarter or two where you might see a little bit of volatility on the occupancy, but that depends on the new centres which get added because the base effect or the new number seats take a little bit of time to ramp up. Having said that, they will not have a significant impact on the margins because our older, mature centres are inching more towards the 90% plus occupancies. So, with that, I think we can fairly say that anywhere between 80% to 85% is where we can effectively look at our occupancies throughout the next three quarters, despite the high growth.

    Risks & concerns

    3
    RiskSeverity

    Operating Cash Flow and Free Cash Flow Impact from Strategic Investments

    Operating cash flow to EBITDA was 0.9x and free cash flow was negative INR 56 crores due to INR 33 crores in security deposits for future buildings and stepped-up capex of ~INR 150 crores. — Management acknowledged

    medium

    Short-term Occupancy Volatility from New Center Ramp-up

    Overall occupancy slightly dipped to 81% from 82% in Q4 FY26, as newly opened centers take time to fill up, potentially causing short-term volatility. — Management acknowledged

    low

    Client Churn due to Portfolio Rebalancing

    Retention rate of 74% reflects deliberate portfolio rebalancing to replace smaller, older clients with larger, longer-duration ones, though committed occupancy remains high at 92%. — Management acknowledged

    low

    Q&A highlights

    8

    “The acquisition of Work Studio is completely through the cash flows that Smartworks generated with its centres over the last one year... Work Studio stood at about 60% occupancy when we acquired it, and we acquired it at the cost of construction... Singapore roughly is about 1,500 seats and it's about 2% of our revenue... cash flows generated from Singapore will continue fuelling growth in Singapore while the India capital allocation will be firmly rooted in the India business.”

    Clarifies the strategic, self-funded nature of international expansion and its limited scale relative to India, while adding immediate capacity.

    asked by Shamit Ashar

    2 min read6 chapters

    Detailed Narrative

    01

    Strong Financial Performance in Q1 FY27

    Smartworks delivered robust financial results in Q1 FY27, with revenue growing 44% year-on-year to INR 546 crores and normalized EBITDA increasing 74% year-on-year to INR 107 crores. The EBITDA margin expanded to 19.6% from 16.2% in Q1 FY26, driven by center maturity and operational efficiencies. Normalized PAT nearly tripled to INR 39 crores, reflecting strong profitability and an 11% sequential increase.

    02

    Operational Expansion and Market Leadership

    The company's operational footprint reached 10.4 million square feet, with committed occupancy in mature centers at 92%. Smartworks added 0.3 million square feet of operational space this quarter and has secured another 3 million square feet for the next nine months, including two large properties in Mumbai and Pune. This expansion reinforces its position as the largest and fastest-growing player in the coworking industry, with a committed contracted revenue of approximately INR 5,400 crores, covering 87% of FY27 revenue.

    03

    Strategic Client Diversification and Cohort Growth

    Smartworks is actively diversifying its client base, reducing dependency on IT/ITES (now 35% of client mix, down from over 40%) and increasing focus on manufacturing, engineering, and professional services. The contribution from GCC clients has grown significantly to 21% of revenue, up from 15% in FY26, with substantial headroom for further growth. The 1,000+ seater client cohort now accounts for over 41% of revenue, up from 37% in FY26, indicating a shift towards larger, longer-duration contracts.

    04

    Capital Allocation and M&A for Future Growth

    The company's capital allocation strategy is focused on self-funded growth, with international cash flows funding international expansion and India cash flows deployed domestically. While free cash flow was negative INR 56 crores this quarter due to a stepped-up capex of ~INR 150 crores, this includes strategic security deposits of INR 33 crores for future buildings and investments in upcoming centers. Smartworks acquired Workstudio in Singapore, an opportunistic move funded by internal cash flows, adding 400-450 seats and leveraging existing high occupancy in Singapore.

    05

    Guidance and Future Outlook

    Smartworks reaffirmed its FY27 guidance, targeting 28-30% revenue growth and 19-20% normalized EBITDA margins. The operational footprint is expected to exceed 13 million square feet by March 2027, with 2.5-3 million square feet of new operational space to be added in FY27. The company maintains strong visibility on its pipeline of signed buildings for FY27 and FY28, with approximately 35% pre-commitment for new centers and a typical ramp-up to 80-85% occupancy within 13-14 months.

    06

    Value-Added Services (VAS) as a Margin Driver

    Value-added services revenue significantly increased, tripling year-on-year to INR 68 crores from INR 22 crores. Management highlighted that VAS offerings are margin-accretive as they operate on a take-rate basis with third-party suppliers, without direct expenses for Smartworks. While still in pilot stages, VAS is expected to meaningfully double over the next two years, opening a clear monetization path and enhancing client stickiness and overall profitability.

    This is an AI-generated summary of a publicly available earnings call transcript.