Sometimes, you find yourself drawn to certain companies even before they hit the stock market. For me, Awfis is one of them, and here’s why. During one of my earlier stints, we were expanding our team. Initially, we rented a dedicated office space, but managing everything, from housekeeping and internet to maintenance, was a hassle. Like many startups back then, smaller teams either rented spaces in malls or independent units, taking care of everything themselves. That’s when companies like Awfis stepped in, offering a premium solution: fully managed shared spaces where services like housekeeping and maintenance were taken care of. Our first shared space experience with Awfis was in Powai. At the time, we paid around ₹7,000 per seat. While that felt like a premium, it saved us from countless operational headaches. Over the years, Awfis has grown significantly. Despite the challenges during COVID-19, they adapted and came back strong. Awfis got listed in mid of 2024, and its stock has delivered a solid 60% return since then. But the big question is: how much bigger can this model grow? With a current market valuation of ₹5,000 crore (~$0.5 billion), Awfis is just 1% of what WeWork was once valued at ($47 billion in 2018-2019). While WeWork's valuation was stretched, it set the stage for comparing Awfis’s potential. So, is Awfis fairly priced, or does it have room to grow? For investors, this could be a fascinating growth journey to watch — or join. The business model: How Awfis works If you're wondering what exactly Awfis does differently, and how it makes money, let's dive in. At its core, Awfis rents out office spaces to businesses of all sizes. But unlike traditional real estate companies or even other coworking firms, Awfis has a unique approach. Imagine you’re a landlord with a large empty office space. Instead of renting it out directly, you partner with Awfis.co-working They manage the space, transform it into a fully functional office, and bring in tenants. In return, you, as the landlord, share the setup costs and get a cut of the profits. This is called the Managed Aggregation (MA) model. It reduces the risk for Awfis and lets them scale faster without massive upfront costs. Unlike the traditional leasing model, where a coworking company might spend heavily to set up a space, Awfis spreads the financial responsibility. The landlord covers 50-90% of the fit-out costs (like furniture and interiors), while Awfis focuses on finding tenants and running the operations. The result? A business that grows quickly while keeping its capital expenditure low. Now, what about revenue? That’s where Awfis gets creative. They make money from seat rentals, and these aren’t just for startups. Their clients range from freelancers to large corporations. For a freelancer, it could mean booking a desk for a day, while for a corporate, it might involve customising a space for hundreds of employees. Awfis also offers additional services like meeting rooms, virtual offices, and even design-and-build solutions for companies that want tailor-made setups. You might ask, "Isn’t this just another version of what WeWork does?" Yes and no. While the basic idea of coworking is the same, Awfis’s model is much more cost-effective. For example, in their managed aggregation model, they share the setup cost with landlords and only take on fully leased spaces in high-demand areas. This minimises financial risk and ensures faster returns. And let’s not forget the scale of this market. India’s flexible workspace market is booming. In 2023, the industry accounted for over 20% of all office leasing in major cities. By 2028, the total addressable market is expected to grow to 122 million square feet, with a healthy annual growth rate of 15%. That’s not just large — it’s enormous. And Awfis, with its presence in 18 cities, is strategically positioned to lead this charge. But how big can Awfis itself get? As of now, it’s valued at around ₹5,000 crore, which is just a fraction of what global players like WeWork were once valued at. Awfis has already scaled to over 130,000 seats across 205 centres and plans to double this number by 2027. That’s ambitious, but they’ve got the model to back it up. Awfis isn’t just focused on Tier-1 cities like Mumbai and Delhi. They’ve also moved aggressively into Tier-2 markets like Guwahati, Chandigarh, and Indore. Why? Because these smaller cities are where the real growth is happening. As companies expand beyond metros, they need ready-to-go offices, and Awfis is perfectly positioned to meet this demand. And then there’s the future of work itself. Post-pandemic, hybrid work models are the norm. Even though this model has walked back a little, it’s still more hybrid than the pre-pandemic days. Furthermore, many companies don’t want to lock themselves into long-term leases for massive office spaces anymore. Instead, they prefer a mix of permanent offices and flexible spaces — a strategy often called ‘core + flex’. Awfis is a natural fit for this trend, offering businesses the flexibility they need without the hassle of managing day-to-day operations. So, if you’re thinking, "This sounds great, but what’s the catch?" Well, there are challenges. Competition is fierce, with players like Tablespace, WeWork India, and Indiqube also expanding rapidly. Then there’s the risk of oversupply in some markets or economic slowdowns affecting occupancy rates. However, Awfis’s managed aggregation model helps it navigate these risks better than most. The financial engine behind the flex revolution Behind the aesthetics, there’s a serious financial engine driving Awfis’s meteoric rise. Let’s break it down to understand where Awfis is today, how it’s performing, and, more importantly, how high its valuation can go. Revenue growth: More than just seats Awfis has been in hyper-growth mode. In FY23, it posted revenue of ₹545 crore. By FY24, this surged by 56% to ₹849 crore. But this isn’t just about selling more desks. Awfis’s revenue streams are becoming more diversified and lucrative. Beyond seat rentals, which still account for Awfis Transform a bulk of its income, Awfis has tapped into ancillary services (like its design-and-build arm), which handles everything from planning office layouts to executing the interior fit-outs, creating fully customised workspaces for businesses. Transform alone is projected to grow at a 23% CAGR, doubling its contribution to overall revenue by FY27. This dual-engine approach ensures that revenue growth isn’t overly reliant on occupancy rates alone. Also, Awfis’s overall revenue is expected to be around ₹2,200 crore by FY27. For perspective, this means nearly a 160% growth in just three years. Margins that speak for themselves One of the biggest critiques of coworking companies globally has been their razor-thin margins — or lack thereof. Awfis, however, is flipping the script. EBITDA margins, which stood at 28.5% in FY23, are expected to steadily climb to ~38% by FY27. How is this possible? Operational Efficiency: Awfis’s managed aggregation model drastically reduces capital costs. Unlike traditional coworking players that take on hefty leases, Awfis partners with landlords who shoulder 50–90% of the fit-out expenses. This not only minimises upfront investment but also accelerates payback periods (16 months versus the industry average of 36 months). Mature Centres Performing Better: As its centers mature (typically within 12 months), occupancy rates stabilise at around 85%, improving revenue per square foot. This has a direct impact on margins, as fixed costs remain constant while revenues rise. Premiumisation: Offerings like Awfis Gold and Elite are aimed at higher-paying clients, which boosts per-seat realisations. For example, while standard Awfis seats generate revenues of ₹8,000 per month, premium formats can fetch 25-40% more. How Awfis stacks up against the competition India’s coworking market is fragmented, with over 440 operators. Yet, Awfis is leading the charge with a market share expected to grow from 7% in FY23 to 12% by FY27. Here’s how they’re pulling ahead: Focus on Tier-2 Cities: While competitors scramble for metro markets, Awfis is making inroads into underserved Tier-2 cities like Guwahati and Chandigarh. These cities are growing faster than Tier-1 markets, with demand surging at a 25% CAGR. Landlord-Friendly Model: The Managed Aggregation approach allows Awfis to scale faster and mitigate occupancy risks, a significant advantage over straight-lease competitors like WeWork India. Valuation: Is 100% upside possible? Awfis is currently valued at ₹5,000 crore (~$0.5 billion), which, for a company growing this fast, feels modest. To figure out if Awfis could double its value, let’s break it down in simpler terms. What is EV/EBITDA and why does it matter? EV/EBITDA stands for Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization. It’s a popular way to measure how expensive or cheap a company is compared to its earnings. Think of it as a way to figure out if a company’s value (enterprise value) makes sense based on how much money it’s making. Right now, Awfis trades at an EV/EBITDA multiple of ~60x for FY24. This means investors are valuing the company at 60 times its expected profits before taxes and other costs. While this might sound high, it’s not unusual for companies growing their profits as quickly as Awfis to trade at higher multiples. If prices do not move any further, this is likely to be in the range of 35x by the end of this year as the earnings will be higher than that of the last year. For comparison, global coworking giants like IWG (a UK-based flexible workspace leader) have traded at multiples of 30-35x during their peak growth years. The case for a ₹10,000 crore valuation Here’s what would need to happen: Revenue Growth: Awfis’s revenue is projected to grow from ₹849 crore in FY24 to ~₹2,200 crore by FY27. This kind of growth sets the stage for a higher valuation. Stronger Profit Margins: Awfis’s EBITDA margins — basically, how much profit it makes before certain costs — are expected to improve from 28% in FY24 to sub-40% in the next three years. As margins improve, the company becomes more profitable, which justifies a higher valuation. Dominance in Tier-2 Cities: Awfis has an early lead in smaller cities like Chandigarh and Guwahati, which are growing faster than metros. If this strategy pays off, it could significantly boost revenue and market share. Awfis has positioned itself as a frontrunner in India’s flexible workspace market. With disciplined financials, a smart growth model, the path ahead looks promising. While challenges remain, Awfis’s ability to balance growth with profitability makes it a standout player. The big question isn’t if Awfis can grow — it’s how much. If they continue executing at this pace, a valuation of ₹10,000 crore by FY27 isn’t just possible — it’s probable. For investors and market watchers, Awfis isn’t just a company to follow; it’s one to keenly track. Having said that the current valuations, which are steep, leave no room for error. Perhaps they already factor in almost all the positives, which could only make the future journey of the stock more volatile with everyone keenly watching for any signs of slippages. On the other hand, it will be the positive surprises, if any, which could further propel the stock price. The other big unknown here is how the intense competition will play out from here on. Lucrative margins and high growth prospects are only going to make it more appealing for bigger bets to be placed in this sector, further intensifying competition. Whether Awfis can continue to beat its competitors and come out on top, while protecting its margins, will be one thing to keenly watch out for. How they deal with this will depend whether Awfis turns out to be Aw-esome or Aw-ful for its investors. Note: We have relied on data from the annual report and industry reports for this article. For forecasting, we have used our assumptions. Parth Parikh has over a decade of experience in finance and research, and he currently heads the growth and content vertical at Finsire. He has a keen interest in Indian and global stocks and holds an FRM Charter along with an MBA in Finance from Narsee Monjee Institute of Management Studies. Previously, he has held research positions at various companies. Disclosure: The writer and his dependents do not hold the stocks discussed in this article. The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.
