Smartworks Coworking Spaces Limited — Q3 FY26 earnings call

Call held 16 Jan 2026

Management summary

Smartworks reported its strongest quarter in Q3 FY26, marking a shift into a compounding phase with improving growth, margins, and cash flows. The company saw robust revenue and EBITDA growth, driven by higher enterprise occupancy and the ramp-up of new centres. Management highlighted a structurally low-cost model, self-funded expansion, and strong demand visibility, positioning them for sustained growth and margin expansion.

Highlights

  • Revenue grew 34% YoY to INR 472 crores, and 11% sequentially.

  • Normalised EBITDA increased 86% YoY to INR 85 crores.

  • EBITDA margin expanded to almost 18%, a bump of over 150 bps within the quarter.

  • PAT-positive quarter under IND AS, with normalised operating cash flows exceeding normalised EBITDA at 1.2x (INR 101 crores).

  • Committed occupancy at operational level rose to 92% from 88% QoQ.

  • Secured over INR 4,700 crores in committed revenue across 9.2 million square feet of operational centres.

  • ROCE significantly jumped by more than 600 bps to just under 21%.

  • Enterprise clients contributed approximately 90% of rental revenue, with 35% from large-format requirements (>1,000 seats).

Key financials

  1. Revenue ₹472 Cr +34%YoY
  2. Normalised EBITDA ₹85 Cr +86%YoY
  3. EBITDA Margin 18%
  4. Normalised OCF ₹101 Cr
  5. OCF to EBITDA Ratio 1.2×
  6. ROCE 21%

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

Growth

  • Annual Growth Rate Growth · annual · High confidence 25% to 30%
    At scale, Smartworks can sustain 25% to 30% annual growth without any incremental equity raised.

    — Neetish Sarda, Managing Director

Capacity

  • Supply Secured Capacity · FY '27 · High confidence 100%
    On the supply side, we now have clear visibility for growth over the next several years. We have secured 100% of our supply for FY '27, with substantial progress already made for FY '28.

    — Neetish Sarda, Managing Director

  • Sustained Growth Trajectory Capacity · annual · High confidence 3 million square foot per year
    We continue to see strong demand-led execution, with LOIs signed for more than 1.62 million square foot during the quarter and are committed to a sustained growth trajectory of 3 million square foot per year.

    — Neetish Sarda, Managing Director

  • New Supply Operationalization Capacity · Q4 · High confidence approximately 1 million square feet
    As we enter Q4, we expect further growth driven by the operationalization of approximately 1 million square feet of new supply and continued maturation of existing centres.

    — Harsh Binani, Executive Director

  • Matured Capacity Capacity · by March 2027 · High confidence 10.2 million square feet

    Previously 7.8 million square feet → 10.2 million square feet

    Our matured capacity stood at 7.8 million square feet as of December 25, which is expected to go up to 10.2 million square feet by the time we hit March 27.

    — Anirudh Tapuriah, Chief Strategy and Investor Relations

Occupancy

  • Mature Centre Occupancy Occupancy · ongoing · High confidence around 93%
    The core of our financial model lies in centre-level economics. Mature centres operate at around 93% committed occupancy, with stable revenues and strong cost control.

    — Harsh Binani, Executive Director

Margin

  • Mature Centre Margin Margin · ongoing · High confidence greater than 27%
    Conceptually, our mature centres exhibit a margin of greater than 27%, largely driven by higher durable occupancy and tight cost control without necessarily compromising on tenures or any pricing action.

    — Harsh Binani, Executive Director

  • Overall Margin Expansion Margin · next two years · High confidence expand structurally quarter-on-quarter
    So, over the next two years, margins are expected to expand structurally quarter-on-quarter, driven by our portfolio maturity, our higher committed occupancy and operating leverage, and not necessarily our pricing action.

    — Harsh Binani, Executive Director

ROCE

  • ROCE Expansion ROCE · foreseeable future · High confidence continue to expand
    And we see significant headroom for the ROCE expansion to continue in the foreseeable future.

    — Harsh Binani, Executive Director

Revenue

  • Ancillary Revenue Growth Revenue · year-on-year · High confidence 30%-35% year-on-year
    So, I think with the footprint growing 30%-35% growth and that is also something that we can easily predict going forward because this is without any new verticals getting added. Just the footprint growth is allowing us to grow at these numbers.

    — Neetish Sarda, Managing Director

Cost

  • Corporate Overheads Cost · next two years · High confidence remain low and stable
    During this period, our corporate cost is not expected to go up meaningfully.

    — Harsh Binani, Executive Director

  • Brokerage Cost as % of Revenue Cost · upcoming quarters · High confidence sustain similar trend (around 2.5%)

    Previously 4.7% → sustain similar trend (around 2.5%)

    So, on our brokerage cost, first, structurally, we want to mention that you've seen a sharp drop over the last three years, where the numbers were close to about 4.7%. And in the recent quarter, this has gone down to 2.5%, we expect that this operating leverage and the margin expansion we've seen because of our cost of acquisition coming down, largely driven by our strong franchisee, lot of multi-city expansions, we will continue sustaining a similar trend.

    — Anirudh Tapuriah, Chief Strategy and Investor Relations

Cash Flow

  • OCF to EBITDA Ratio Cash Flow · long-term · High confidence more in the range of 1.2
    So, from that perspective, while you might see quarter on quarter numbers move, sustainably you will always see this greater than 1 and settle more in the range of 1.2 on a more long-term basis.

    — Harsh Binani, Executive Director

Capex

  • Annual Capex Capex · every year · High confidence INR 350 crores to INR 400 crores
    For 2.5 to 3 million square foot addition every year, we envision a capex of INR 350 crores to INR 400 crores every year, for which the company is very well capitalized and external capital raise will not be required.

    — Harsh Binani, Executive Director

Expansion

  • Expansion Focus Expansion · FY '27 and FY '28 · High confidence Tier 1 cities in India
    Majority of the growth is driven in tier 1 cities in India where we are going ahead and consolidating our leadership position in most of the larger cities where Smartworks is present.

    — Neetish Sarda, Managing Director

Risks & concerns

  • Client concentration risk

    low

    Top 10 clients contribute only about 21% of rental revenue, a figure that has steadily declined even as deal sizes have increased, enhancing visibility and reducing concentration risk.

    Management acknowledged

  • Ramp-up time for large campuses

    low

    Despite taking up large buildings (400,000-600,000 sq ft), the company is able to reach 80-85% occupancy within the first 12 months, similar to smaller centres.

    Management acknowledged

  • Churn of large 1,000+ seater clients

    low

    Management stated that 1,000+ seater deals are long-tenured (average 50+ months) with 6-8 month notice periods, providing ample time to refill space if a client moves out.

    Analyst acknowledged

Areas of evasion (2)

  • Exact EBITDA flow-through for ancillary revenue
  • Specific future margin stabilization numbers

Q&A highlights

2 direct
Increase in seat retention rate Direct
I think it just coincidentally happened that the last quarter happened to be around the 40, 45-48 month mark from COVID. We did a lot of deals during COVID which we wanted to renegotiate and bring up to market terms. I think having a retention rate closer to about 85%-plus is something that you'll continuously see.

Analyst questioned the sharp increase in seat retention (93% from 74%), and management attributed it to renegotiating COVID-era deals and expects it to stabilize around 85%+, indicating improved contract terms.

Asked by Karan Khanna

Growth and margin outlook for other operating revenue (VAS/FAAS) Partial
So Mohit, our ancillary revenue growth is because of the base of properties increasing to over 10 million. The existing property's occupancy is going up. The ancillary revenues or the supplementary revenues that we generate from our existing building have also gone up significantly. I think VAS or Fitout-as-a-Service as a vertical is still a very small part of the total revenue. It still only stands at about INR 27 crores for the quarter.

Analyst sought clarity on the significant jump in other operating revenue (INR 22 crores to INR 66 crores), and management explained it's driven by increased occupancy and footprint, with VAS/FAAS being a smaller, high-margin component, but did not give a clear EBITDA flow-through for this specific segment.

Asked by Mohit Agarwal

Risk to occupancy from large tenants (1000+ seats) vacating Direct
Sure. So, Yashas, if you look at 1,000 plus seater deals, these are not short-term requirements that are coming. These are 1,000 plus seater deals on an average have a tenure of over 50 months and this has continuously been increasing. In fact, if you look at the tenures from FY '22, 1,000 plus seater deals which were 12% of our revenue, on an average at 42 months tenure, those tenures have increased to 52 months and the lock-in period for these tenures have also increased in the same fashion.

Analyst questioned the risk of large tenants leaving, and management clarified that these deals are long-tenured (average 50+ months) with significant notice periods, mitigating occupancy risk.

Asked by Yashas Gilganchi

2 min read 6 chapters

Detailed narrative

Q3 FY26 Performance Highlights

Smartworks delivered its strongest quarter in Q3 FY26, with revenue growing 34% year-on-year to INR 472 crores and 11% sequentially. Normalised EBITDA surged 86% year-on-year to INR 85 crores, leading to an EBITDA margin expansion to almost 18%, an increase of over 150 basis points. The company also achieved a PAT-positive quarter under IND AS, with normalised operating cash flows of INR 101 crores, resulting in an OCF to EBITDA ratio of 1.2x. This performance reflects strong operating leverage and cash-generating capabilities.

Strategic Growth Pillars & Enterprise Focus

The company emphasized its transition into a 'compounding phase,' driven by sustained growth, predictable annuity-like revenue, a structurally low-cost model, and self-funded expansion. Growth is firmly anchored in enterprise demand, with enterprise clients contributing approximately 90% of rental revenue. Large-format requirements (over 1,000 seats) accounted for 35% of rental revenue, and multi-city clients contributed over 30%, indicating increasing consolidation of workspace needs on Smartworks' platform.

Financial Model & Margin Expansion

Smartworks' financial model is based on strong centre-level economics, with mature centres operating at around 93% committed occupancy and exhibiting margins greater than 27%. The overall ROCE significantly improved by more than 600 basis points to just under 21%. Management expects margins to expand structurally quarter-on-quarter over the next two years, driven by portfolio maturity, higher committed occupancy, operating leverage, and cost discipline, with corporate overheads remaining low and stable.

Supply & Capacity Outlook

The company has clear visibility for future growth, having secured 100% of its supply for FY'27 and made substantial progress for FY'28. Smartworks is committed to a sustained growth trajectory of 3 million square feet per year. Committed occupancy at the operational level increased to 92% from 88% quarter-on-quarter, securing over INR 4,700 crores in committed revenue. The matured capacity is expected to grow from 7.8 million square feet as of December 2025 to 10.2 million square feet by March 2027.

GCC Demand & SmartVantage Platform

Global Capability Centers (GCCs) remain a crucial growth driver, with Smartworks having signed over four large mega GCC deals (over 1,000 seats each) in the last nine months. The newly launched SmartVantage platform aims to offer a holistic solution beyond just space, providing ready-to-operate campuses with regulatory, technology, and partner support. This platform enables GCCs to go live in 6-8 weeks, addressing core GCC problems of speed, compliance, and execution at scale, and is expected to contribute to both workspace and take-rate revenue.

Capital Allocation & Self-Funded Growth

Smartworks aims for 25% to 30% annual growth while remaining self-funded, leveraging healthy cash flows from capital raised prior to IPO and unutilized IPO proceeds. The company envisions an annual capex of INR 350 crores to INR 400 crores for 2.5 to 3 million square feet of additions, for which it is well capitalized without needing external equity. The focus for expansion remains primarily on Tier 1 cities in India, where large campus-style properties are more readily available.

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