Smartworks Q1 FY27: Growth Stayed Fast, Margins Stayed Firm, Capex Stepped Up

Smartworks Coworking Spaces Limited opened FY27 with another sequential improvement in scale and profitability. Revenue from operations for Q1 FY27 was INR 5,462 million (546.2 crore), up 44% year on year and 5% quarter on quarter. Normalised EBITDA came in at INR 1,069 million (106.9 crore), up 74% year on year, with normalised EBITDA margin at 19.6%.

The company’s messaging stayed consistent across the earnings deck and the conference call: buildings are secured well ahead of time, and revenue is contracted before it is earned. As of June 30, 2026, management stated contracted rental revenue of about INR 54,000 million (5,400 crore), covering about 87% of expected FY27 revenue.

A quarter defined by operating leverage and a larger, stickier client mix

Smartworks highlighted that enterprise clients contributed about 92% of rental revenue, with the 1,000+ seat cohort contributing 41% of rental revenue on roughly 48-month total tenures. Multi-city clients contributed 35% of revenue, up from 31% in FY26.

Portfolio metrics continued to scale. Total secured SBA was stated at 16.9 million square feet, with 14.5 million leased and 10.4 million operational. Mature centres (9.1 million square feet) reported committed mature occupancy of 92%. Overall occupancy was 81% and committed occupancy was 86%, reflecting newly opened capacity still ramping.

A key operational narrative in Q1 FY27 was portfolio rebalancing. Seat retention declined to 74% (from 89% in Q4 FY26), but management attributed this to deliberate churn and mark-to-market repricing at renewals, while maintaining mature committed occupancy.

Note: Values converted from INR million to INR crore. Normalised metrics are presented by the company as non-GAAP measures.

Cash conversion dipped, but balance sheet leverage remained low

Smartworks reported a negative working capital structure, with debtor days at 6 in Q1 FY27. Trade payables were INR 1,701 million (170.1 crore) versus trade receivables of INR 370 million (37.0 crore).

However, normalised OCF to normalised EBITDA was 0.9x in Q1 FY27, down from 1.1x in Q4 FY26 and 1.4x in Q1 FY26. Management attributed the dip to security deposits paid to landlords to secure buildings for FY28 and partially FY29. This also contributed to negative free cash flow of INR 559 million (55.9 crore) for the quarter as capex increased to INR 1,510 million (151.0 crore), up 66% year on year.

Despite the heavier investment cycle, Smartworks continued to report low leverage. As of June 30, 2026, gross debt was INR 2,134 million (213.4 crore) and net debt was INR 56 million (5.6 crore). The company stated cost of borrowing was below 9% and referenced a CARE rating upgrade earlier in the year.

Returns metrics remained a core part of the investment case. Annualised RoCE (normalised) was 21.5% in Q1 FY27, unchanged sequentially and up materially from 12.7% a year earlier.

Guidance stayed intact and capex plans were clarified

Management reaffirmed FY27 guidance of 28% to 30% revenue growth, 19% to 20% normalised EBITDA margin, and operational SBA of 12.5 to 13.0 million square feet by March 2027.

On the call, the company guided for FY27 capex of INR 550 to 600 crore, including both refurbishment capex and new fit-outs. Management stated new fit-out capex is around INR 1,350 per square foot with an annual inflation assumption, and refurbishment capex is estimated at around 15% of the initial capex every three years.

In terms of the growth pipeline, Smartworks highlighted that 2.2 to 2.7 million square feet is expected to become operational over the next nine months, with upcoming large-format properties including Eastside in Pune and Eastbridge in Mumbai discussed for H2 FY27.

Market context: flex penetration, GCCs, and the AI narrative

The earnings deck positioned Smartworks’ growth against broader market trends. It cited India office stock growth of about 6.2% year on year, India flex stock growth of 23% to 25%, and Smartworks growth of 44%.

Management also leaned into the GCC tailwind. GCC contribution to revenue was stated at about 21% in Q1 FY27, up from 15% in FY26. The company discussed SmartVantage as a platform for GCC-specific needs, but clarified on the call that incremental services monetisation is not yet meaningfully reflected in results and is expected to show up over the next two to three quarters as newly signed GCC offices complete fit-outs and move into operations.

Internationally, the company discussed Singapore as a small, self-funded extension. Management stated Singapore is about 1,500 seats and about 2% of revenue, and that growth there will be opportunistic and funded by Singapore cash flows, not the India balance sheet.

Takeaways from Q1 FY27

Smartworks entered FY27 with fast revenue growth and continued normalised margin expansion, while keeping returns steady despite a higher capex quarter. The company’s core claims rest on two measurable pillars: a large secured pipeline of space and a high level of contracted rental revenue.

What investors will likely track over the next few quarters is straightforward. First, whether the large H2 FY27 deliveries come online on schedule. Second, whether occupancy and committed occupancy in the newer footprint ramp as guided without prolonged pressure on overall occupancy. Third, whether cash conversion returns to above 1x EBITDA as the one-off landlord security deposits normalise.

For now, management has kept FY27 guidance unchanged and reiterated that the expansion cycle is designed to be self-funded, with a low net debt position and a negative working capital model supporting growth.