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    Smartworks Coworking Spaces Limited

    SMARTWORKSGood
    Services·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

    8

    • 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

    Single quarter

    06 metrics
    1. 01Revenue₹472 Cr+34%YoY
    2. 02Normalised EBITDA₹85 Cr+86%YoY
    3. 03EBITDA Margin18%
    4. 04Normalised OCF₹101 Cr
    5. 05OCF to EBITDA Ratio1.2 x

    Guidance & targets

    15
    CategoryTargetPriority
    Growth
    Annual Growth Rate
    25% to 30%
    		High
    Capacity
    Supply Secured
    100%
    		High
    Capacity
    Sustained Growth Trajectory
    3 million square foot per year
    		High
    Capacity
    New Supply Operationalization
    approximately 1 million square feet
    		High
    Capacity
    Matured Capacity
    10.2 million square feet
    		High
    Occupancy
    Mature Centre Occupancy
    around 93%
    		High
    Margin
    Mature Centre Margin
    greater than 27%
    		High
    Margin
    Overall Margin Expansion
    expand structurally quarter-on-quarter
    		High
    ROCE
    ROCE Expansion
    continue to expand
    		High
    Revenue
    Ancillary Revenue Growth
    30%-35% year-on-year
    		High
    Cost
    Corporate Overheads
    remain low and stable
    		High
    Cost
    Brokerage Cost as % of Revenue
    sustain similar trend (around 2.5%)
    		High
    Cash Flow
    OCF to EBITDA Ratio
    more in the range of 1.2
    		High
    Capex
    Annual Capex
    INR 350 crores to INR 400 crores
    		High
    Expansion
    Expansion Focus
    Tier 1 cities in India
    		High

    Risks & concerns

    5
    RiskSeverity

    Client concentration risk

    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

    low

    Ramp-up time for large campuses

    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

    low

    Churn of large 1,000+ seater clients

    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

    low

    Areas of Evasion(2)

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

    Q&A highlights

    3

    “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

    2 min read6 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    06

    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.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.