Receptive to approaches from financial advisor
Mulls evaluating acquisition targets

Smartworks, a Noida, India-headquartered co-working firm, intends to raise USD 30m in exchange for a minority stake by the end of 2019 to back its growth and expansion plan in the country said CEO Neetish Sarda.

The company will be receptive to approaches from financial advisors and will look to hire one to help with the fundraiser, he said.

Smartworks is open to both strategic and financial investors, Sarda mentioned, highlighting that pedigree of the strategic investor is very important and should enable the firm to scale rapidly. The company receives regular approaches from investors, however, since the company is profitable, it also has an option of raising debt, he said.

Founded in 2016, the company is profitable at a consolidated level and clocked revenues of up to INR 1bn (USD 14.1m) in FY19, he said, adding that it plans to treble its revenues this financial year.

Smartworks has a footprint of 2.8m sq. ft across 23 locations in nine cities such as Delhi NCR, Kolkata, Bengaluru, Mumbai, Hyderabad, Chennai and Pune, catering to more than 600 organizations. The company houses large customers such as Jaguar, Microsoft, Fox Studio, and in the last six months, it has added 1m sq. ft of space, he said.

By the end of 2019, the company aims to have around 35 centres, covering 4.5m sq.ft, and within the next four years, it is looking to grow to 20m sq. ft. The company will look at Tier 2 cities as well, however, it will be a small percentage, according to Sarda. The average price per seat is INR 10,000, he mentioned.

Although Smartworks has not yet given any thought to international expansion plans, the Southeast Asia region will be the next natural step, he added.

Acquisition outlook

According to Sarda, the company will be open to acquiring real estate assets such as old warehouses. It recently took up one warehouse in Chennai, and also acquired a mall in Bengaluru which has been converted into a commercial space, he said.

The company is also exploring diverse stake buying options. Citing an example of an undisclosed regional player, Sarda mentioned that Smartworks is in the early stage of discussions with the firm to infuse capital for a minority stake, and once the firm becomes established, it will look to acquire a larger stake. Regional co-working players that are established in a certain micro-market with multi-city presence will be interesting to explore, he said, adding that the firm is receptive to evaluating target referrals.

It is also focusing on VR (virtual reality) to enable clients to envision the space they will be seated in and will be interested in holding discussions with such firms. Smartworks will explore both acquiring or partnering with proptech companies as well, he said.

Sarda did not mention the exact valuation and said the firm will make a decision on a case-by-case basis. There are a bunch of sustainable projects that the company wishes to undertake sustainable energy and water treatment plants. It aims to integrate WELL Certification in its newer centres, which enables to focus on air, water and safety quality in a building. According to Sarda, Smartworks will also explore acquiring a stake in companies that have developed models around sustainability and energy efficiency.