Smartworks has 4.3 million sq ft in hand, twice H2 launch need

Smartworks Coworking Spaces Limited had 4.3 million square feet under fit-out or awaiting handover in H1 FY27, more than twice the 1.6-2.1 million square feet it needs to open in H2 FY27. Its total secured footprint was 17.5 million square feet across 71 centres, including letters of intent.

What future capacity has Smartworks secured?

Smartworks had secured 17.5 million square feet of total supply across 71 centres in H1 FY27, up 38% year on year. Of this, 10.9 million square feet across 58 centres and 249,000 seats was operational, leaving 6.6 million square feet outside the operating portfolio.

The company identified 4.3 million square feet of this non-operational footprint as near-term capacity in hand. It comprised 2.1 million square feet across six centres under fit-out and a further 2.3 million square feet awaiting handover. Management said supply was secured through FY28 and that work on FY29 capacity was already under way.

Smartworks named Eastside in Kharadi, Pune, at about 863,000 square feet, and Eastbridge in Vikhroli, Mumbai, at about 815,000 square feet, as two projects under fit-out. Both campuses were due to go live in H2 FY27 with what management called healthy pre-commitments. The company also added Sattva Group as a developer partner for Sattva Aura RRB in Bengaluru, a site of about 493,000 square feet.

How does Smartworks capacity compare with its H2 FY27 opening requirement?

Smartworks has capacity in hand exceeding twice the upper end of its H2 FY27 opening requirement. The company said it needed 1.6-2.1 million square feet to go live in the second half, compared with 4.3 million square feet under fit-out or awaiting handover, a surplus of 2.2-2.7 million square feet.

At the start of FY27, Smartworks guided for 12.5-13 million square feet of operational space by March 2027. After H1 FY27, management retained an expectation of about 12.5-13 million square feet, while its scorecard showed 10.9 million square feet operational and additions of 2.5-3 million square feet still planned.

The secured pipeline is larger than the capacity immediately needed for H2 launches. Operational space increased by 0.9 million square feet in H1 FY27 to 10.9 million square feet, while the total secured footprint reached 17.5 million square feet. Management said suitable office buildings must be secured early because commercial real-estate capacity cannot be created overnight.

Smartworks’ existing footprint was weighted towards West India, which accounted for 44%, followed by South India at 30% and North and East India at 26%. Eastside and Eastbridge add large campuses in Pune and Mumbai, while the Sattva relationship adds a Bengaluru location to the pipeline.

What do newer campuses mean for Smartworks occupancy?

Newer Smartworks centres were filling at lower committed occupancy than mature locations in Q2 FY27. Centres open for more than 12 months covered 9.7 million square feet and were 88% occupied and 91% committed, while centres open for less than 12 months covered 1.3 million square feet and were 48% committed.

Overall occupancy was 81% in Q2 FY27, unchanged from Q1 FY27, compared with 88% at mature centres. Smartworks reported overall committed occupancy of about 86%, and management said committed occupancy was the measure used for guidance. Client lock-ins covered landlord rent commitments by about two times, according to the company.

The age profile shows that 3.4 million square feet, or 31% of operational space, had opened in the preceding 24 months. Smartworks said centres reach break-even occupancy in about 12 months and reach 85-90% occupancy in under 18 months. Management also said centre economics can improve as fit-out is paid back and contracts re-price.

How is Smartworks funding capacity before it earns revenue?

Smartworks is deploying capital into buildings before they open, with management saying about one-fifth of capital was in non-earning buildings. The company deployed Rs 306.6 crore of capital expenditure in H1 FY27 against its FY27 plan of Rs 550-600 crore, with H2 spending weighted towards Eastside and Eastbridge.

This investment affected cash conversion in Q2 FY27. Normalised operating cash flow was 0.9 times normalised earnings before interest, tax, depreciation and amortisation, or EBITDA, overall, while operational centres generated more than 1.0 times. Management attributed the difference to deposits paid on buildings before their opening.

Normalised annualised return on capital employed, or ROCE, was 21.6% in Q2 FY27, compared with 21.5% in Q1 FY27 and 13.6% in Q2 FY26. Management said headline ROCE had remained around 21-22% for three quarters and would stay near that level until the H2 campus build-out. Gross debt stood at Rs 233.7 crore and net debt at Rs 82.7 crore in Q2 FY27.

Revenue from operations reached Rs 591.4 crore in Q2 FY27, up 39% year on year and 8% sequentially, while normalised EBITDA rose 68% year on year to Rs 116.9 crore. Following H1 FY27 revenue growth of 41% year on year, management raised its FY27 revenue-growth guidance to 33-35% from 28-30% and retained its 19-20% normalised EBITDA margin guidance.

Conclusion

Smartworks has secured supply beyond its immediate H2 FY27 launch programme: 4.3 million square feet in hand is more than twice its stated 1.6-2.1 million square feet launch requirement. The pipeline supports growth beyond March 2027, but it also means a material portion of capital is committed to campuses that are not yet contributing as mature operating capacity.

The next disclosures to watch are the H2 FY27 openings of Eastside and Eastbridge, progress towards about 12.5-13 million square feet of operational space by March 2027, and handover of the remaining 2.3 million square feet awaiting delivery. Management has said H2 capital expenditure will be concentrated in Eastside and Eastbridge, while newer centres continue their occupancy ramp-up.