Once the worldwide poster child of the startup world, WeWork Inc.‘s first international franchise has encountered several challenges as a result of WeWork’s internal issues, which ultimately caused the parent company to file for bankruptcy in 2023.
In a recent interview with Moneycontrol, MD & CEO Karan Virwani said that WeWork India, the co-working space of Bengaluru’s Embassy Group, is attracting a lot of interest from investors for its Rs 3,000 crore initial public offering (IPO) that opens on October 3. This is a stark contrast to the investor disinterest of previous years.
Once the worldwide poster child of the startup world, WeWork Inc.‘s first international franchise has encountered several challenges as a result of WeWork’s internal issues, which ultimately caused the parent company to file for bankruptcy in 2023.
According to Virwani, “no one was prepared to finance us at all for eight years.” However, he said that investors are fighting to be a part of the WeWork India narrative, indicating that attitude has changed.
This change comes after years of restructuring, debt repayment, and strategic positioning that have strengthened the company’s financial situation in addition to a wider adoption of flexible offices.
From Debt to Self-Sustained Development
The pivotal moment for WeWork India occurred in January 2024 when the Embassy Group, the promoter, invested around Rs 500 crore in the company via a rights issue, mostly to pay off expensive debt.
According to Virwani, “all of the cash went into paying off debt we had incurred at a time when no one else was ready to support the firm.” A smaller balance sheet and better financials are the outcome.
With WeWork India’s debt now at around Rs 200 crore, it has significantly decreased, and according to Virwani, the net debt would be “virtually zero” by March 2026.
Additionally, the business produces enough cash flow to cover its capital needs without relying on outside funding. “The company is now entirely self-sufficient,” the CEO and MD said.
Due to businesses’ use of hybrid models after the epidemic, which has accelerated the uptake of co-working spaces, this financial reversal occurs at the same time as a wider spike in demand for flexible offices in India.
“What gives us confidence is the general demand—we are the obvious leaders in this market, and organizations are embracing the flexible workplace model at an increasing rate,” Virwani said.
Proceeds of the Embassy and WeWork IPO
The IPO of more than 35 million shares by WeWork India is a pure offer for the sale of Embassy Group and WeWork shares, with the promoter receiving Rs 2,294 crore.
The majority of it will go toward collective debt repayment. “Some will simply return the risk capital that Embassy had invested in this firm and stuck by for eight years, while others will unleash value in new initiatives and new assets,” the MD and CEO said.
At a time when international investors were hesitant to make investments, Embassy saw the IPO as a confirmation of its early wager on WeWork. With the support of the real estate giant, WeWork’s Indian franchise was able to grow.
A Congested Marketplace
At a time when rivals like Awfis and Smartworks have already gone public, WeWork India has joined the main market. But ironically, Virwani said, that has benefited rather than harmed.
The listing of all these operators was quite advantageous. They informed the investors about the company’s foundations. The investors already understood the model’s operation by the time we met them,” he stated.
The MD and CEO noted that WeWork India’s proposal concentrated on distinguishing elements like size, financial strength, and brand.
With adjusted EBITDA margins of 22%, the company’s FY24 sales was little over Rs 2,000 crore. According to Virwani, these measures are noticeably superior than peers.
Our revenue is between 1.5 and 2 times that of our competitors. “We have twice the EBITDA margins of our rivals,” he said.
According to Virwani, the business has adopted a longer-term perspective for the public issue’s price, which is Rs 615–648 per share.
“The IPO pricing is somewhat less than what we paid for a rights offering ourselves. Our goal is for investors to profit from this process,” Virwani said.
Maintaining the WeWork Name
Virwani said that the business would stick with the WeWork moniker in spite of the negative connotations associated with it.
“WeWork India was the world’s first franchise. The brand continues to define its category. Over the last eight years, we have significantly increased the name’s worth in India. We do not intend to alter that very soon,” he said.
WeWork Global kept its investments in India in spite of its issues in the US. According to Virwani, the company has stabilized and even earned a profit in the previous two quarters under its new owners. The parent company’s share sale in the IPO will be in line with Embassy’s. “Every discussion we have had has focused on the India business’s potential for expansion,” Karan Virwani said.
WeWork India pays a mere 2.5% management fee to its parent company, but because of its worldwide network and identity, it charges a 10–20% price premium, demonstrating the brand’s practical advantages. The CEO and MD said, “The value we receive is significantly more than the expense.”
Growth Engines: Startups, Businesses, and GCCs
The expansion of WeWork India has reflected more general changes in the workplace. Big businesses are increasingly embracing flexible workspaces, which were once popular with freelancers and startups. Corporates, including Fortune 500 companies, private banks, and an expanding number of global capability centers (GCCs), now make up 80% of WeWork India’s member base.
Approximately 36% of our members are from the GCC. A growing number of mid-tier international companies are establishing themselves in India, replacing the previous trend of only Fortune 1000 companies doing so. Additionally, they are employing teams who interact with customers and front-end engineers in addition to back-office positions. “The transition from outsourcing to insourcing is evident,” Virwani said.
In India, startups continue to play a crucial role in WeWork’s ecosystem. Before expanding, unicorns like Zepto and Meesho began in WeWork offices. “We aim to be the urban infrastructure play that removes the operational difficulties so entrepreneurs can concentrate on their main business,” Virwani said.
The Effect of H-1B
According to Virwani, the uncertainty surrounding US immigration laws may increase demand for Indian workplaces. It is anticipated that more talent would remain in India as a result of the restriction of H-1B visas, spurring entrepreneurship and innovation.
“There will be a significant amount of creativity in India if brain drain stops and people return. That increase will manifest itself in our structures,” he said.
Pay attention to Metros
WeWork India is still dedicated to the metro areas, even if other competitors are experimenting with smaller markets. According to Virwani, office absorption in India reached a record 77 million square feet last year, with 95 percent of the space concentrated in the top eight cities.
“We plan to expand by meeting demand. Instead of dispersing into smaller markets, we will penetrate deeper into urban areas,” Virwani said.
WeWork is considering Tier II cities using such concept. “We will take into consideration any city that achieves critical mass, continuous demand, and sufficient Grade A supply.” However, the top eight cities still house the majority of high-quality assets and developers, the MD and CEO said.