WeWork India wants to raise funds, expand and turn profitable, despite parent’s IPO debacle

WeWork India plans fundraising for expansion to turn a profit, in the face of parent’s IPO debacle.

Unsplash

Global office rental giant WeWork’s IPO debacle has cast a strong shadow over its future as well as its brand. And in a move to shrug off any bad association, its Indian affiliate, WeWork India, is reportedly looking to raise a new USD 200 million round for further expansion in a counter-doubts move.

WeWork’s India operation is managed by its local partner, Bengaluru-based Embassy Group, an Indian realty giant.

WeWork India, per local media ET citing company executives, intended to scale up its operations and even turn a profit at the entity level in a year.

WeWork India has 26 operational co-working centers in the country with a seating capacity of 46,000. The company expects to double the capacity to around 100,000 seats by the end of next year with the help of the new funding from domestic and foreign investors.

“WeWork India is an independent entity with the right to execute its business in India and it pays a management fee to the American firm. Embassy has already invested USD 183 million in WeWork India, including USD 140 million as equity, and we will continue to infuse more funds for growth,” Karan Virwani told local media YourStory.

That said, Virwani has expressed concern that the delay of WeWork’s global IPO could affect the valuation of WeWork India.

This year WeWork was in on-going talks with the India unit, and expressed interest to buy a 70% stake in WeWork India, in a cash-and-stock deal worth USD 2.75 billion. However, after the botched-up IPO, there is no clarity if the deal will happen anytime soon.

WeWork operates on a revenue and profit-sharing model with its Indian entity unlike its business model in China and Japan. Virwani owns Embassy Buildcon Llp, which is the holding company of WeWork India. Incidentally, US private equity fund Blackstone Group has invested in Embassy.

If the deal between WeWork and the India counterpart does not take place in the next few months, Embassy plans to sell its assets and raise USD 563.06 million to invest in WeWork India. Embassy was also in talks to raise USD 100 million after WeWork’s failed IPO, from India’s ICICI Bank, its existing investor but nothing materialized.

It is notable that coworking spaces in India will have a collective seating of 13.5 million users by 2020 according to recent research by real estate services company JLL. The growth of the co-working industry on a global level is highest in the Asia-Pacific region. However, according to a JLL global survey, only 40% of all coworking spaces turn profitable.