WeWork Embassy Group - Indian Co-working Experiment
Anjal Agrawal
M&A and Strategy at Virtusa || Ex-IB at Nomura (PPO) || IIM Shillong (17-19) || CA || Yes Bank FutureReady Scholar || Ex-JPM || Ex-Baker Tilly DHC || #ProudSINKWAD
The initial plan was that Embassy would lease the building to WeWork and have them do all the heavy lifting to setup the India business of WeWork. With the evolution of the industry, shared office space was the obvious next step for Embassy as well.
Thus, the simple lease agreement turned into a full-fledged partnership called WeWork India, where Embassy Group also invested an initial $25mn to facilitate the initial working capital. The deal was hammered for almost a year by a two-member team and the company was formalised in 2016. It took a little longer to launch the first hub (in July 2017), which was 140K sq. ft. and boasted a capacity of 2,200 members with a 90% occupancy rate. But the second hub took just a month and was live in Mumbai in Sep-17 with a seating capacity of 1,900+ members sprawled over 190K sq. ft.
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WeWork India vs WeWork Global
WeWork India is an outlier for the global company. Even as WeWork global struggles to keep operations afloat, WeWork India clocked revenues of $170mn in FY23, and had an EBITDA of $30mn and a PAT (profit after tax) of $7mn.
Established in 2017, the Embassy Group owned 100% of WeWork India, and the international interest came only in 2020 when WeWork put in $100mn in exchange for about 27.5% equity in the India franchise (via 1 Ariel Way Limited, a UK entity that is a subsidiary of WeWork Global).
While WeWork global has filed for bankruptcy and needs continuous funding to grow its business, WeWork India doesn’t need external capital. The global team looked at the Indian model and how successful it was, then made it the benchmark for them to execute everywhere else globally. Following the success in India, WeWork has followed a similar model in Israel, South Africa, Latin America and China, among others.
WeWork India has about 90,000 desks in the country and boasts an occupancy rate of >80%, which is beyond comfortable because it achieves break even at an occupancy rate of 57-58%. WeWork India is growing at 40% year-on-year.
WeWork India’s business can be divided into four broad categories: on-demand (pay per use), all access (subscription-based), private office suite (fully ready; plug and play) and managed office spaces for long-term parties. 70-80% of revenues come from the private office suite. WeWork India aims to focus on the top 7 cities and does not want to spread itself too thin by entering non-metro cities just to increase its presence. Over the past years, it has been facing competition from WestBridge-backed Indiqube, Peak XV-backed Awfis, Smartworks and several others.
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Why did WeWork India succeed?
WeWork India aims to add 20,000 seats each year adding 6,500K sq. ft. of assets across 50 locations in New Delhi, Gurugram, Noida, Mumbai, Bengaluru, Pune, and Hyderabad. In Dec-23, it secured $65mn from BPEA Credit to strengthen its reach.
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WeWork India – Cutting the Umbilical Cord with the Brand Origin
In Apr-24, WeWork global announced that it is exiting the Indian market, by selling its 27% stake along with Embassy’s 13% stake (a total of 40% stake) to a consortium of new investors including the Enam group family office, A91 Partners, and Caratlane Founder Mithun Sancheti, for $144mn.
Embassy Group is looking to list WeWork India in the domestic bourses by the end of 2025.
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Market of Co-working Space in India
The flexible office space inventory is estimated to touch 81m sq. ft. by 2025 from 53.4m sq. ft. currently, a remarkable 52% growth. The rise of start-up culture, the growth of small or boutique firms, and the transformative impact of the pandemic have catapulted the demand for flexible and hybrid work models. IT/ITes firms, BFSI companies, and others are also embracing this trend in their expansion plans, recognizing the need to offer more flexibility to their workforces. Thus, the market size is projected to double in the next 5 years at a 15% CAGR.
Interestingly, Goa will host India’s 1st floating co-working space. Goa will soon have an off-shore vessel, Flowork-Alpha, which will serve as a co-working space for Web3 developers, innovators, and technical support startups. The project is owned by W3BONTHESEA-Oceancrest and aims to position Goa as the preferred destination for the tech sector. The barge will offer meeting rooms, recreational areas, 5G-connected workspaces, and rooms. This initiative is part of Goa's strategy to become the creative capital of India and create opportunities for the youth and professionals.
WeWork India’s competitor Awfis has filed the draft prospectus for an IPO next year. Awfis is backed by Mauritius-based investment firm Bisque Limited, Peak XV Partners, QRG Investments, Emerge Capital and VBAP Holdings. Awfis caters to freelancers, startups, SMEs, large corporates, and MNCs and offers coworking solutions. It provides a wide spectrum of flexible workspace solutions ranging from individual flexible desk needs to customised office spaces for startups, small and medium enterprises as well as for large corporates and multinational corporations.
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WeWork Global’s exit is coming at a time when there has been a revival of coworking spaces in India. The coworking space share increased to 27% in Q1 2023 from 14% in Q1 2019. However, WeWork India has always operated very differently and independently of its global counterpart – which is also why the US company's Indian arm was unfazed by WeWork Global’s insolvency. WeWork India’s operation excellence has created a global playbook for the WeWork brand.
I hope this was an informative experience for you as it was for me. Until next time, thank you for your time. Please post your feedback and comments.
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Please find below all the information sources that have been instrumental to the above article, along with some additional reading materials. Gratitude to all the creators –
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