Awfis Space Solutions IPO opens today: Should you subscribe to the issue?

The Rs 598.93 crore initial public offering (IPO) of Awfis Space Solutions kicks-off for bidding on Wednesday, May 22. The company is offering its shares in the price band of Rs 364-383 apiece. Investors can make bids for a minimum of 39 equity shares and its multiples thereafter. The three-day bidding for the issue closes on Monday, May 27.
 

New Delhi-based Awfis Space Solutions, incorporated in December 2014, is a workspace solution provider in India. The company offers a wide range of flexible workspace solutions, catering to the needs of individuals, start-ups, SMEs, and large corporations. It has expanded its business offerings and now provides in-house fit-out and facility management services at its centers.
 

Awfis Space IPO includes a fresh share sale of Rs 128 crore and an offer-for-sale (OFS) of up to 1,22,95,699 shares. Promoter Peak XV Partners V and other shareholders Bisque Ltd and Link Investment Trust are participating in the OFS. The net proceeds shall be utilized towards funding capital expenditure- establishment of new centres; funding the working capital requirements and general corporate purposes.
 

Ahead of its IPO, Awfis Space Solutions mobilised a little over Rs 268.61 crore from anchor investors as it allotted 70.13 lakh equity shares to 32 funds at Rs 383 apiece.  Its anchor book included Goldman Sachs Funds, Allianz Global Investors Fund, HSBC Global Investors Fund, Volrado Venture Partners Fund, Natixis International Funds, Ashoka Whiteoak and others.
 

The company's core solution is co-working, including flexible workspaces, custom office spaces, and mobility solutions. Awfis Space Solutions Limited also provides supporting services such as food and beverages, IT support, infrastructure services, and event hosting. It operates on a management agreement (MA) model.
 

Awfis Space Solutions operates 169 centers across 16 cities in India, with a total of 105,258 seats and a chargeable area of 5.33 million square feet, as of December 31, 2023.  Additionally, 31 centers with 25,312 seats are currently under fit-out, with a chargeable area totaling 1.23 million square feet.
 

The company has reserved shares worth Rs 2 crore for its eligible employees, who will get a discount of Rs 36 apiece. Of the net issue, 75 per cent shares are reserved for qualified institutional bidders (QIBs), while non-institutional investors (NIIs) will get 15 per cent allocations. Remaining 10 per cent shares shall go to the retail investors of the issue.
 

Awfis Space Solutions reported a net loss of 18.94 crore with a revenue of Rs 633.69 crore for the nine months ended on December 31, 2023. The company's net loss came in at Rs 46.64 crore with a revenue of Rs 565.79 crore for the financial year ended on March 31, 2023.
 

Axis Capital, IIFL Securities, ICICI Securities and Emkay Global Financial Services are the book running lead managers of the Awfis Space Solutions IPO, while Bigshare Services is the registrar for the issue. Shares of the company shall be listed on both BSE and NSE likely on Thursday, May 30. Here's what a host of brokerage firms say about the IPO of Awfis Space Solutions:
 

SMIFS
Rating: Subscribe for long-term
Awfis has maintained an efficient capital expenditure of Rs 50,000 per seat, significantly lower than the industry average,  thanks to its MA model. It serves over 2,295 clients, including  large corporations, SMEs, start-ups, and freelancers. The total addressable market for flexible workspace in India is  projected to reach 282 million sq. ft. by FY26, and Awfis is well-positioned to capture this growth, said SMIFS.
 

"The company’s bottom  line is also expected to improve in the coming quarters due to the company’s MA model which is  reducing the capital expenditure per seat gradually for the company. We recommend a subscribe  to the issue as a good long rem investment, given strong industry growth prospects, future growth  from capex done and fresh post issue capex," it added.
 

Swastika Investmart
Rating: Neutral
Awfis leverages an integrated platform approach to cater to diverse space sourcing and demand needs. While the company exhibits promising top-line growth, achieving profitability remains a key challenge. Awfis has experienced negative cash flow in the past and operates in a highly competitive environment susceptible to macroeconomic fluctuations, said Swastika Investmart.
 

"Given the negative EPS, a P/E ratio cannot be calculated. Considering the potential for future growth balanced against the current financial situation and competitive landscape, we recommend a neutral stance on the Awfis IPO. Investors should conduct thorough due diligence and closely monitor the company's progress before making a final decision," the brokerage said.
 

Anand Rathi Research
Rating: Subscribe for long-term
Awfis Space is a leading provider of flexible workspace solutions, which offers a comprehensive range of options. The company has a price-to-sales ratio of 4.9 times of its FY23 earnings. The  company has shifted to an asset light model which will show benefits in  the coming time period, said Anand Rathi Research in its IPO note.
 

"The company has a large total addressable market (TAM) driven by factors such as enterprise focus on flexibility, cost optimization,  workforce fluidity, reverse migration, workplace evolution, focus on  wellness, facilities, and amenities, as well as growth of start-ups in Tier-I and Tier-II cities," it added with a 'subscribe for long term rating' for the issue.
 

Marwadi Financial Services
Rating: Subscribe
Considering the FY24 annualized Ebitda of Rs 237.7 crore on a post issue basis, the company is going to list at a EV/Ebitda of 11.25 times with a market cap of Rs 2,658,7 crore. There are no listed entities comparable with the company’s business, said Marwadi Financial Services.
 

"We assign a 'subscribe' rating to this IPO as the company has a leadership position in a large and growing marketplace and has diverse space sourcing & demand strategies. Also, it is available at reasonable valuations on an absolute basis," it added.
 

Master Capital Services
Rating: Subscribe for listing gains
The Indian office market is expected to grow at a CAGR of 6.3 per cent from 2023 to 2026. Awfis Solutions plans on continuing to build an industry leading capital  efficient model in order to keep hold of the market share and increase the  percentage of operational centers and seats under the MA model, said Master Capital Services' IPO note.
 

"The company also intends to expand in new  and existing markets by evaluating potential locations and cities based on multiple criteria. But the company  has incurred losses in the past financial years. Investors looking to invest can invest for listing gains," it said.
 

Ventura Securities
Rating: Subscribe
Ventura Securities has suggested investors subscribe to the Awfis Space Solutions IPO citing its market leadership and extensive presence; the growth potential in the boom market; innovative MA model; diversified supply and demand strategy; and strong outlook. However, it has cited increasing competition, market fluctuations, operation risks and client retention as the key challenge.

 

 

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