Smartworks Coworking Spaces Ltd Q3 FY26 Earnings Analysis

- Smartworks expects revenue growth to accelerate, with a targeted 30%+ growth in the near term. (Page 8) - New large deals are continuing to go live, contributing to revenue expansion in H2 FY26. (Page 8) - Portfolio growth of 2.5 to 3 million sq.ft. annually supports scaling revenue and margins. (Page 14) - GCC (Global Capability Centers) rental revenue, currently at 15%, is expected to double in the next few years, driven by the new SmartVantage offering. (Page 19) - Ancillary revenue and value-added services (VAS) are set to double, with rapid VAS growth. (Page 8 & 19) - Mature center occupancy is increasing, expected to drive higher operating leverage and margin expansion. (Pages 6, 13) - Blended per-square-foot rental realizations are trending up from Rs.160-165 last year to Rs.175 in Q2 FY26, with further growth expected. (Page 22)

- Smartworks expects revenue growth to accelerate, targeting 30%+ growth in the near term. (Page 6) - Expansion of mature portfolio (from 7.5 million sq.ft. towards 12 million sq.ft.) will drive margin expansion and operating leverage. (Pages 6, 13) - Normalized EBITDA margin improved to 16.4%, with further expansion expected as new centers mature and corporate/brokerage costs reduce. (Pages 6, 13, 19) - ROCE has improved to 14.3%, expected to nearly double in the next two years with more headroom beyond that. (Page 6) - Ancillary revenue growth, including VAS, is expected to double, contributing to higher earnings. (Page 8, 19) - Increasing deal sizes and long-tenure large clients, especially GCCs, provide revenue visibility and predictability. (Pages 6, 22) - Operating cash flow-to-EBITDA close to 1x indicates strong cash generation supporting sustainable profit growth. (Page 6)

- Current CAPEX includes approximately Rs.186 crores spent in H1 FY26, primarily for building out interiors and common amenities of new centers. - The Eastbridge property in Vikhroli requires about Rs.110 crores CAPEX, to be deployed in phases as occupancy ramps up; handover expected Q2/Q3 FY27. - CAPEX is phased: ~50% spent within first 4 months after building handover for common areas and pre-committed client spaces; remaining built out as clients commit. - Security deposits are paid 2-3 months before handover and on the day of handover to landlords, balancing cash flows with deposits collected from customers. - The company follows an asset-light model by leasing rather than buying buildings, with CAPEX of approximately Rs.1,350 per sq. ft for interiors, enabling capital-efficient growth. - Smartworks plans to scale by adding 2.5-3 million sq. ft annually, requiring 5-6 large buildings (~400,000-500,000 sq. ft each). - Future CAPEX aligns with large campus expansions and securing supply for FY27 and beyond, supporting 25%-30% annual growth without additional funding.

- The transcript does not mention any current or planned new fundraising through debt or equity explicitly. - Smartworks emphasizes its asset-light model and strong cash generation to support growth without additional funding. - As stated on page 7, they expect to transition into a self-sustaining CAPEX model, enabling 25%-30% annual growth without any additional funding. - The company highlights strong cash flows, robust liquidity, and cash balances in the near term. - Significant CAPEX and security deposit outflows are being managed internally through client security deposits and operational cash flows. - No specific plans for fresh equity or debt fundraising are disclosed in this earnings call.

- Since the IPO, Smartworks has signed more than 2.7 million square feet of space, reflecting strong growth momentum. - In the recent quarter, they added and paid security deposit for more than 2 million square feet of new properties, indicating a robust order book. - The company follows a time-based milestone approach for security deposits, with deposits paid progressively before property handover, minimizing upfront capital lock-in. - They typically start marketing a new building 5-6 months before completion, with about 30-35% pre-commitment from existing client demand, which helps secure leases early and accelerates occupancy ramp-up. - Their strategy includes taking large individual buildings (400,000 to 500,000 sq.ft average size), needing to add 5-6 buildings annually to achieve 2.5 to 3 million sq.ft growth. - These factors collectively suggest a strong and growing order book aligned with current and future expansion plans.