Should you be worried about WeWork India's ₹3,000cr IPO?
What's the story
WeWork India's ₹3,000 crore initial public offering (IPO) has come under the scanner of proxy advisory firm InGovern. The firm's founder Shriram Subramanian raised concerns over the IPO's structure and pre-listing conditions. He said these factors raise questions about promoter intent, financial sustainability, and oversight. The IPO consists of a full offer for sale (OFS) with no new capital infusion.
Share concerns
Temporary release of pledged promoter shares before IPO
A major concern highlighted by InGovern is the temporary release of pledged promoter shares before the IPO. Over 53% of WeWork India's pre-IPO shares held by Embassy Buildcon were previously pledged against some ₹2,065 crore worth of borrowings. "The pledges were revoked mainly to facilitate the IPO. Under their agreement, if the listing didn't happen, then within 45 days the shares would have to be re-pledged," Subramanian said.
Financial challenges
Continuing operating cash losses
WeWork India has been continuing with its operating cash losses, which are further complicated by lease agreements that act as debt obligations. "When a loss-making company does a pure OFS and promoters use it to deleverage, it raises a big concern," Subramanian said. He also noted that almost 43% of FY25 revenue went to lease payouts, with the company's brief profit mainly coming from a deferred-tax gain.
Governance concerns
Repeated audit qualifications and pending enforcement proceedings
InGovern flagged repeated audit qualifications as a potential red flag for investors. The company highlighted material weaknesses in internal controls from FY22 to FY24, including poor vendor documentation and related-party transparency. It also noted that several enforcement proceedings are pending against WeWork India's promoters under the CBI, ED, and Prevention of Corruption Act.
Market response
Brand dependence as a risk factor
InGovern has also flagged brand dependence as a risk factor for WeWork India. The company's 99-year license from WeWork Global is contingent on promoter control and compliance. Any conviction or change in promoters might jeopardize brand rights, posing an existential threat. Despite these concerns, the IPO saw strong anchor participation with ₹1,348 crore raised from 67 investors including ICICI Prudential MF, and HDFC MF among others.