Awfis Space Solutions Limited is the largest flexible workspace solutions company in India as on December 31, 2023, based on total number of centers. As on December 31, 2023, they are ranked 1st among the top 5 benchmarked players in the flexible workspace segment with presence in 16 cities in India. Further, as on December 31, 2023, they are present in the maximum number of micro-markets in India. As on December 31, 2023, they have 169 total centers across 16 total cities in India, with 1,05,258 total seats and total chargeable area of 5.33 million sq. ft., of which 31 centers and 25,312 seats are under fit-out with chargeable area 209 aggregating to 1.23 million sq. ft. In addition, they have entered into signed letters of intent (“LOI”) with space owners for 13 additional centers, with 10,859 seats aggregating to 0.55 million sq. ft. As on December 31, 2023, they have over 2,295 clients and have presence in 52 micromarkets in India. Prior to the widespread adoption of flexible workspaces, SMEs and mid-size corporates were operating out of offices with inadequate infrastructure and amenities, and there was a need for offices with better infrastructure and amenities at an affordable rate with flexible tenure and security deposit. As a result, they originally launched Awfis in Fiscal 2015 as a co-working space provider, when they identified an opportunity in India to cater to companies that were seeking value offerings with high quality infrastructure in key micro markets and central business districts (“CBD”). The clients had the ability to book flexible coworking spaces across a network of the properties. Under the MA model, the developers or space owners may typically incur capital expenditure on fit-out, in part or full, the remainder being borne by the operator (if any), depending on other terms of the MA model, often foregoing a fixed rental for a component of minimum guarantee on a case-to-case basis and may take up a share of the revenue/profit on pre-negotiated terms. Most of the MA arrangements are structured on a profit or revenue sharing model with the space owner and provide a minimum guarantee (“MG”), payable generally starting anywhere from the 5th to 13th month of operations, until the end of the term of the contract. As of December 31, 2023, the MG at our MA centers was on an average 45.88% of the micro-market rental. The split of the capital expenditure under the MA model between the space owner and them is determined upfront and the space owner’s share remains fixed for the term of the contract. They also focused on building mid-size centers in order to strike an optimal balance between operational efficiency, optimal center margins, occupancy build-up and community engagement. The average size of the centers launched since April 2022 stands at 32,979sq. ft. of chargeable area. In addition, they adopted a demand-based build approach wherein they typically only build a small portion of the center with base amenities after they sign a center, and the rest is built out as and when they enter into arrangements with clients for the utilization of the space at the center. Further, once they established a strong presence in Tier 1 cities they decided to expand to Tier 2 cities early on and currently have centers across seven Tier 2 cities in India as of December 31, 2023. According to the CBRE Report, Tier 2 cities in India are set to be the next growth frontier for flexible workspaces with demand for commercial real estate in these cities expected to increase significantly in the next 3 -4 years. They are well-positioned to capitalize on this growth with the expansion into these cities. As of December 31, 2023, the company was operational in 16 cities with operational chargeable area of 4.10 million Sq. FT., 138 operational centers, having 79,946 operational and 60,038 occupied seats with an occupancy of 75.10%. Thus, for all this fronts, it has marked steady growth. As of the said date, it had 3053 employees on its payroll. As per financial performance, Awfis Space Solutions Limited has posted total income / net profits of Rs 216.02 Cr / Rs (42.64) Cr (FY21), Rs 278.72 Cr / Rs (57.16) Cr(FY22), Rs 565.79 Cr / (46.6) Cr (FY23) and Rs 633.69 Cr / Rs (18.94) Cr (Q3 FY24). So as per previous financials data, company has shown good growth. Company is making consistent losses, but net cashflow is positive. Company has an average EPS of Rs (9.01) and average RoNW of (38.60%) for last three fiscals. Issue is priced at a P/BV of 9.63 as per NAV of 39.79 as on 31.12.23. If we attribute latest earnings of FY22, FY23, TTM and annualised FY24 on fully diluted equity post issue, then asking price is at a P/E of around (46.52), (57.01), (105.27) and (49.57) respectively, which looks fully priced. As per RHP, there is a no listed peers. On BRLM's front, four lead managers are associated with this IPO, and have handled around 100 IPOs in last three fiscals. ICICI Securities Limited: This is 40th Main Board IPO from this BRLM. From last 10 Main Board IPOs, four opened below issue price and remaining opened above or at par issue price on the day of listing. As of now, from last 10 Main Board IPOs, three are trading below issue price and remaining are trading above issue price. ( As on 16.05.2024) Axis Capital Limited: This is 31st Main Board IPO from this BRLM. From last 10 Main Board IPOs, four opened below issue price and remaining opened above or at par issue price on the day of listing. As of now, from last 10 Main Board IPOs, two are trading below issue price and remaining are trading above issue price. ( As on 16.05.2024) IIFL Securities Limited: This is 30th Main Board IPO from this BRLM. From last 10 Main Board IPOs, three opened below issue price and remaining opened above or at par issue price on the day of listing. As of now, from last 10 Main Board IPOs, two are trading below issue price and remaining are trading above issue price. ( As on 16.05.2024) Emkay Global Financial Services Limited: This is 3rd Main Board IPO from this BRLM. From last 2 Main Board IPOs, both opened below issue price on the day of listing. As of now, from last 2 Main Board IPOs, both are trading above issue price. ( As on 16.05.2024) As per financials, Awfis Space Solutions Limited has shown good sales growth, RoNW is (27.54%) and P/E is respectively (46.52), (57.01), (105.27) and (49.57) as per FY22, FY23, TTM and annualised FY24 earnings. So, issue looks fully priced and also company is making consistent losses, but net cash-flow is positive. Company is in business of flexible workspace solutions in India and one of the largest player, which is growing business segment with low entry barrier. The growth of the sector will be good. Performance of BRLMs are good. So, we give NEUTRAL rating for this IPO. Readers must consult a qualified financial advisor prior to making any actual investment decisions.
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