Smartworks Coworking Spaces Limited — Q2 FY26 earnings call

Call held 7 Nov 2025

Management summary

Smartworks delivered a strong Q2 FY26, marking its second quarter as a listed company, with robust revenue and EBITDA growth. The company highlighted its asset-light model, improving ROCE, and strong cash generation. Strategic focus remains on large enterprise clients, Global Capability Centers (GCCs), and expanding its managed campus model, despite a temporary dip in retention rate due to re-leasing at higher yields.

Highlights

  • Revenue stood at ₹425 crores, growing 21% YoY and 12% QoQ.

  • Normalized EBITDA rose 46% YoY to ₹70 crores, with a 16.4% normalized EBITDA margin.

  • Annualized ROCE improved to 14.3%, the highest in the company's history.

  • Net-debt-negative at ₹59 crores, with normalized operating cash flow of ₹62 crores.

  • Total footprint reached 12.7 million sq ft across 14 cities, serving 760+ clients.

  • Committed rental revenue stands in excess of ₹4,400 crores.

  • 1,000-plus-seats cohort now makes up 35% of rental revenue, tripling from 12% three years ago.

  • Retention rate for Q2 FY26 was 74%, compared to 94.5% in Q1, attributed to voluntary churn for higher yields.

Key financials

  1. Revenue ₹425 Cr +21%YoY
  2. Normalized EBITDA ₹70 Cr +46%YoY
  3. Normalized EBITDA Margin 16.4%
  4. PBT ₹25 Cr +40%QoQ
  5. PBT Margin 5.8%
  6. Annualized ROCE 14.3%
  7. Net Debt ₹-59 Cr
  8. Normalized Operating Cash Flow ₹62 Cr
  9. OCF-to-EBITDA 1×
  10. Committed Rental Revenue ₹4,400 Cr
  11. Retention Rate 74%
  12. Blended Per-Sq Ft Rental ₹175

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

Revenue

  • Revenue Growth Revenue · near-term · High confidence 30%-plus
    Our Q2 revenue from operations stood at Rs.425 crores, which is up by 12% from Q1, and 21% from Q2 of FY25. We aspire to continue growing at 30%-plus in the near-term.

    — Harsh Binani, Executive Director

  • Ancillary Revenue Growth Revenue · future · High confidence double
    Our ancillary revenue growth is also set to double, with VAS growing very rapidly and VAS continuing to grow.

    — Management

  • GCC Revenue Revenue · next couple of years · High confidence double

    Previously 15% → double

    we expect our GCC revenue to double in the next couple of years.

    — Harsh Binani, Executive Director

  • Other Business Revenue Revenue · next few quarters · Medium confidence scale up

    Previously ₹40 crores (H1 FY26) → scale up

    And just to add to the guidance that we have, if you look at last complete year, we were at about Rs.20 to 25 crores of revenue from that business this year. In the first half itself, it scaled up to about Rs.40 crores. You will see this number scale up over the next few quarters and there is a FAAS guidance which we have also given in the presentation.

    — Neetish Sarda, Managing Director

Profitability

  • ROCE Profitability · next two years · High confidence double

    Previously 14.3% → double

    Our ROCE improved to 14.3%, nearly double of FY25 levels. We expect this to double in the next two years, and we continue to see more headroom for ROCE growth beyond that as well.

    — Harsh Binani, Executive Director

  • EBITDA Growth Profitability · future · High confidence faster than revenue
    Our EBITDA will continue growing faster than revenue, driven by critical scale and operating leverage, while our ancillary business lines will eventually grow it further.

    — Harsh Binani, Executive Director

  • Center-level EBITDA Margin Profitability · current · High confidence 23% to 24%-odd
    So from a center level EBITDA margin perspective, what we have actually disclosed is around a 16.4% kind of a corporate EBITDA margin. If you look at our corporate cost, our corporate cost is around 8%. So from a center level EBITDA margin perspective, you can actually add both of them and it will come to approximately 23% to 24%-odd.

    — Anirudh Tapuriah, Chief of Strategy & Investor Relations

Capacity

  • New Operational Supply Capacity · H2 '26 · High confidence 1 million sq.ft.
    we will have 1 million sq.ft. of new operational supply and additionally 1.4 million sq.ft. of our current capacity will mature in H2 '26.

    — Management

  • Maturing Capacity Capacity · H2 '26 · High confidence 1.4 million sq.ft.

    — Management

  • Annual Growth in Sq Ft Capacity · every year · High confidence 2.5 to 3 million square foot
    for Smartworks to grow at 2.5 to 3 million square foot every year, we need to add five to six buildings, considering the average size of buildings that we are taking now is 400,000 to 500,000 square foot.

    — Neetish Sarda, Managing Director

Client Retention

  • Retention Rate Client Retention · foreseeable future · Medium confidence upwards of 80-85%

    Previously 74% → upwards of 80-85%

    We expect the retention in foreseeable future to continue upwards of 80-85%, and at the same time, we will continue having some healthy voluntary churn as well in this.

    — Harsh Binani, Executive Director

Capex

  • Annual Growth without Funding Capex · annual · High confidence 25%-30%
    At this scale, we expect to transition into self-sustaining CAPEX model, enabling 25%-30% annual growth without any additional funding.

    — Harsh Binani, Executive Director

Risks & concerns

  • Temporary impact on OCF-to-EBITDA due to security deposit payout for new capacity

    medium

    New capacity additions require security deposit payouts, temporarily impacting OCF-to-EBITDA, but are for higher future growth.

    Management acknowledged

  • Impact of new, immature centers on overall EBITDA margins

    medium

    New centers drag down overall blended margins during their ramp-up phase (first 8-12 months) until they mature.

    Management acknowledged

  • Voluntary churn from COVID-era contracts impacting retention rate

    medium

    Retention rate dropped to 74% in Q2 due to voluntary churn of COVID-era clients, but this is strategic to re-lease at higher yields, with retention expected to normalize to 80-85%.

    Management acknowledged

Q&A highlights

3 direct
Retention ratio decline and re-leasing at higher spreads Direct
while we do not comment on individual deals, two large renewals ended in Q2, which came from the COVID period. Both spaces have been leased at higher yields, which is largely driving this healthy churn and explains the retention. We expect the retention in foreseeable future to continue upwards of 80-85%, and at the same time, we will continue having some healthy voluntary churn as well in this.

Addresses a key operational metric decline, explaining it as a strategic move to optimize yields rather than a demand issue, and provides future outlook.

Asked by Girish Choudhary

Impact of shift to institutional landlords on pricing strategy and economics Direct
Now that brand visibility has increased significantly, we are seeing even large developers partnering with us and giving us the kind of deals required for Smartworks to take up the entire campus and giving us their inventory as well... in terms of financials, obviously, we now have the ability of negotiating with scale. And we are seeing the same sort of numbers that we are able to achieve on the institutional side as well.

Clarifies how Smartworks maintains negotiation power and favorable economics despite partnering with larger institutional landlords, leveraging its increased brand visibility and scale.

Asked by Shamit Ashar

Cash flow management, CAPEX, and security deposits in an asset-light model Direct
Asset light, we mean, sir, that because we are not going ahead and buying these buildings, the capital which is required to be invested on CAPEX is only Rs.1,350 per sq. ft. CAPEX that we typically do to build out the interiors of the office spaces. That is only a fraction of the cost of the building... on the security deposit arbitrage, Smartworks actually negates the security deposit that we pay to our landlords.

Explains the core of their asset-light model, detailing how CAPEX is managed for interiors rather than property acquisition, and how security deposits are leveraged to manage cash flow, which is crucial for scalability.

Asked by Yashovardhan Agarwal

3 min read 7 chapters

Detailed narrative

Q2 FY26 Financial Performance Overview

Smartworks reported a strong Q2 FY26, with revenue reaching ₹425 crores, marking a 21% year-on-year and 12% quarter-on-quarter growth. Normalized EBITDA increased by 46% YoY to ₹70 crores, achieving a 16.4% normalized EBITDA margin. The company's PBT stood at ₹25 crores, up 40% QoQ, with the PBT margin expanding to 5.8% from 4.6% in Q1. Annualized ROCE improved to 14.3%, the highest in the company's history, reflecting capital discipline and operating leverage.

Strategic Growth and Market Leadership

As the largest Pan-India managed office platform, Smartworks continues to lead India's managed workspace evolution. Its total super-built-up area reached 12.7 million square feet across 14 cities, serving over 760 clients. The mature portfolio, comprising 7.5 million square feet, operates at an 88% occupancy with a committed occupancy above 93%. The company aims to continue growing at 30%-plus in the near-term, supported by its ability to add 2.5 to 3 million square feet of space annually.

Managed Campus Model and Client Strategy

Smartworks' managed campus model, transforming bare shell buildings into tech-enabled ecosystems, differentiates it in the market. Large enterprise deals are a key driver, with the 1,000-plus-seats cohort now contributing 35% of rental revenue, tripling from 12% three years ago. Rentals from multi-city clients account for over 30% of revenue, indicating strong client stickiness. The company's landlord base has also strengthened, with 24% of its portfolio now from institutional developers like DLF and Hiranandani.

GCC Opportunity and SmartVantage Platform

Global Capability Centers (GCCs) are a significant growth driver, currently contributing over 15% to rental revenue, with an expectation to double in the next couple of years. To capture this demand, Smartworks launched 'SmartVantage,' a dedicated GCC enablement platform offering end-to-end solutions beyond just workspace, including compliance, technology, and partnerships. This platform positions Smartworks to capture a meaningful share of the estimated 50-55 billion square feet of new office demand from GCCs over FY26-27.

Operational Efficiency and Asset-Light Model

The company's asset-light model continues to demonstrate efficiency, with gross debt reduced by nearly 45% since its IPO. Normalized operating cash flow stood at ₹62 crores, with an OCF-to-EBITDA ratio close to 1x. Corporate costs as a percentage of revenue from operations declined from 13.8% in 2022 to 7.9% in H1 FY26. Smartworks expects to transition into a self-sustaining CAPEX model, enabling 25%-30% annual growth without additional funding, by focusing CAPEX on interiors rather than property acquisition.

Supply Expansion and Demand Outlook

Smartworks has strengthened its supply visibility, with a signed-up portfolio of up to 14 million sq ft and clear visibility for FY26 and FY27. In H2 FY26, the company expects 1 million sq ft of new operational supply and 1.4 million sq ft of existing capacity to mature. The industry is projected to see 15-18 million sq ft of new flex space absorption annually. Smartworks' strategy of taking large individual buildings (400,000-500,000 sq ft) allows it to meet demand even in mature cities with limited supply.

Retention and Churn Dynamics

The retention rate for Q2 FY26 was 74%, a decrease from 94.5% in Q1. Management clarified this was a 'voluntary churn' for clients who signed during the COVID period at lower rates, allowing Smartworks to re-lease spaces at higher yields. This strategic churn is expected to continue over the next few quarters. However, committed occupancy remains high at 88%, and the company expects the retention rate to normalize upwards of 80-85% in the foreseeable future.

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