Why WeWork India is not worried about WeWork's insolvency

 Why WeWork India is not worried about WeWork's insolvency

WeWork India said it generated sales of Rs 1,400 crore in FY23, an EBITDA of Rs 250 crore, and an approximate profit after taxes of Rs 60 crore, even though the company is now having difficulty staying afloat.

Although WeWork Global's bankruptcy is causing many stakeholders to lose sleep, Karan Virwani, CEO of WeWork India, is not one of them. First off, the Embassy Group has a 72.5% controlling share in WeWork India. WeWork Global subsidiary 1 Ariel Way Limited, based in the United Kingdom, is the owner of the remaining 27.5%.

WeWork, the NYSE-listed flexible space provider, is reportedly getting ready to declare for bankruptcy as early as next week. This will serve as a wake-up call for the previously very successful business. The firm created by Adam Neumann, valued at $47 billion in 2019, has suffered a sharp decline in share price from a high of $520. At the conclusion of the day's trading on November 1, WeWork's share price was down more than 99 percent year-to-date (YTD).

Virwani, nevertheless, is not discouraged by the collapse. WeWork's first non-owned location was in India. WeWork India was entirely owned by the Embassy Group when it was founded in 2017; foreign investment didn't come until 2020, when WeWork invested $100 million in exchange for around 27.5% of the franchise's ownership.

The international team has since adopted certain strategies from WeWork India. "Continuous financing is necessary for the worldwide team to expand their company. Ours is unique in that we are profitable and do not need outside funding. Virwani clarified why his staff and building developers would survive by saying, "The global team looked at the representation of our and how successful it was as well then made it the benchmark for them for implementing everywhere else in the world."

WeWork has implemented a similar strategy in Israel, South Africa, Latin America, China, and other countries after its success in India, he said.

It makes sense for WeWork Global to try to duplicate the India model abroad. It claims an occupancy rate of over 80% and has over 90,000 workstations nationwide. This is quite comfortable since it breaks even at an occupancy rate of 57–58 percent, according to Virwani.

WeWork India said that it generated sales of Rs 1,400 crore in FY23, with an EBITDA of Rs 250 crore and a profit after tax (PAT) of around Rs 60 crore, despite the fact that WeWork Global is now struggling to maintain operations.

Earnings before interest, taxes, depreciation, and amortization is known as EBITDA.

Its FY23 figures are still being audited, to be sure. Nonetheless, the business is expected to expand by 40% YoY in the current fiscal year as well.

The good news is mostly attributed to WeWork India's margins, which are between 20 and 25 percent. WeWork India can reinvest money back into the firm because to the excellent margins. Given the size of the company's capital expenditure, the reinvestment was necessary. About Rs 25 crore is spent by WeWork India to prepare a 1,00,000 square foot building.

The four main segments of WeWork India's business include managed office spaces for long-term parties, completely ready (plug and play) private office suites, all access (subscription-based), and on-demand (pay per usage).

Seventy to eighty percent of the company's income originates from the private office suite. WeWork India wants to concentrate on the top seven cities rather from overstretching itself by going for non-metropolitan areas just to be more visible. It has faced competition in recent years from a number of companies, including Indiqube, financed by WestBridge, Awfis, backed by Peak XV, and Smartworks.

"We have some rivals that are in the low-cost, low-value, and high-volume game. Even though some people have greater square footage than we do, our sales and profit margin are twice as high as those of our closest rival. Virwani said, "That is only because we are in an industry that offers us a larger return on the money we invest.

WeWork India is still optimistic and plans to add 20,000 seats annually to its 6.5 million square feet of assets spread over 50 sites across Hyderabad, Bengaluru, Pune, New Delhi, Gurugram, Noida, Mumbai, and Bangalore. To expand its reach, it even managed to acquire Rs 550 crore in December from funds managed by BPEA loan, a private loan platform.

The idea that we are a subsidiary is a common one. We're not. We are a wholly separate Indian corporation with complete authority over this location, and we are not accountable to the global (team)," Virwani said.

According to disclosures made at the end of the June quarter, WeWork India only pays an administration charge to the global business, which is in the $2–4 million range. A revenue share does not exist.