Awfis Listing: Organizing and branding a commoditized category

Executive Summary:

• Awfis, the first venture-backed co-working startup to go public. We expect IPOs from this space like WeWork, Smartworks, Beehive et. all
• Awfis has created a brand in what is a commoditized market with high RoCE, high growth, cash profits, great supplier and customer retention metrics yet valued at ~2.5x / 20x forward revenue/earnings multiple
• This establishes that Indian public markets value consumer services businesses very differently from tech platforms and high gross margin product businesses
• IPO multiples same as the last private round, continuing the trend of leaving value on the table for investors
• OFS component was increased, and fresh issue reduced from the previous DRHP filing

What’s to doubt?

Cash flow profitable, accounting profitability to follow

Under Ind AS 116, leases are shown as both an asset and a liability on the balance sheet. The liability is the present value of future lease payments, and a corresponding Right-of-Use (ROU) asset is created. Interest on the liability is a finance cost in the P&L, and the ROU asset is depreciated. This change increases EBITDA, as lease expenses are no longer deducted. Hence, Cash EBIT calculated as EBITDA less actual lease rentals, reflects the notional cash profit for the company given its net debt negative position.

Indian markets value consumer services business from non-linearly scalable ones

We evaluate Awfis based on EV/Revenue and Price/Cash EBIT (P/E) multiple. At the higher IPO price band Awfis was valued at 3.3x trailing revenue multiple and 29x P/E multiple. Assuming 40% revenue and profit growth for FY25, we arrive at NTM Revenue and P/E multiples of 2.3x and 21x respectively.

While Awfis does not have any direct listed players in India, we try to benchmark Awfis against listed Commercial REITs, retail leasing businesses and listed co-working players (not directly comparable as per RHP).

?IPO priced at similar multiples to last private round, continuing with the trend of leaving value on the table for investors

OFS size increased from previous DRHP filing

Before the OFS, selling shareholders- Peak XV and Chrys Capital, held a 47% stake. Since the last DRHP filing in Dec-23, the OFS size was increased, and the fresh issue reduced.

IPO details

About The Rainmaker Group

The Rainmaker Group is the investment banking partner of choice for some of India's most consequential private businesses as they traverse their fundraising journey - from their first growth round to pre-IPO. The firm has delivered growth equity and secondary transaction milestones for over a dozen unicorns, soonicorns, and now-listed businesses.

The firm’s ‘rainmakers’ pride themselves on a founder-like mindset and a proprietary execution process that has delivered industry-leading closure rate and client retention.

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Disclaimer:

Any mention of stock/sector names does not constitute investment advice. For educational purposes only

Data sources: CapIQ, FactSet, Company DRHP and other filings