Proxy firm InGovern raises red flags on WeWork India IPO despite strong anchor backing

The Rs 3,000-crore IPO comprised up to 4.63 crore shares priced at Rs 615–648, with about 45 percent allotted to anchor investors, raising Rs 1,348 crore

Proxy advisory firm InGovern has raised red flags on WeWork India’s IPO even as the issue drew only a modest response after a strong raise from anchor investors. Founder Shriram Subramanian told Moneycontrol that the IPO’s structure — a full offer for sale (OFS) with no new capital infusion — along with its pre-listing conditions, raises questions on promoter intent, financial sustainability, and oversight.

The Rs 3,000-crore IPO comprised up to 4.63 crore shares priced at Rs 615–648, with about 45 percent allotted to anchor investors, raising Rs 1,348 crore. Since the issue was purely an OFS, proceeds flow entirely to selling shareholders — mainly Embassy Buildcon LLP and WeWork International — rather than to WeWork India itself. Subscription from non-anchor investors remained weak during book building, reflecting investor unease over governance risks.

One concern is the temporary release of pledged promoter shares before the IPO. Over 53 percent of WeWork India’s pre-IPO shares held by Embassy Buildcon were earlier pledged against about Rs 2,065 crore 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. There aren't many precedents of promoters revoking pledges temporarily just to enable an offer for sale,” Subramanian said.

InGovern’s note added that such temporary releases make promoter holdings look unencumbered before listing. If re-pledging resumes later or debt repayment lags, control risk could re-emerge — undermining the clean-up exercise, added Subramanian.

Persistent operating losses further complicate the picture. “WeWork India continues to make operating cash losses, and lease agreements are effectively debt obligations,” Subramanian said. “When a loss-making company does a pure OFS and promoters use it to deleverage, it raises a big concern.” Filings show nearly 43 percent of FY25 revenue went to lease payouts, with its brief profit mainly from a deferred-tax gain. Lease commitments mimic leverage even as promoters pare equity exposure, creating a mismatch between business fundamentals and promoter actions, Subramanian said.

Audit issues are another red flag. “Repeated audit qualifications are something investors would monitor closely. The company will need to demonstrate that it has addressed those control weaknesses over the next few quarters, because persistent audit flags point to weak board oversight,” Subramanian said. InGovern’s review cited material weaknesses in internal controls from FY22 to FY24 — including poor vendor documentation and related-party transparency — and noted that the Red Herring Prospectus gave no detail on corrective measures. Regulators, it said, should track whether the board strengthens oversight post-listing.

Promoter litigation adds to risks. Several enforcement proceedings remain pending against WeWork India’s promoters under the CBI, ED, and Prevention of Corruption Act. “This IPO was filed under Regulation 6 (2) — which allows stressed or restructured companies to list — and SEBI’s framework remains largely disclosure-based. The onus is on investors to be discerning,” Subramanian said. InGovern also flagged brand dependence: WeWork India’s 99-year licence from WeWork Global hinges on promoter control and compliance. Any promoter conviction or change could jeopardise brand rights, posing an existential threat.

Still, anchor participation was strong, with ₹1,348 crore raised from 67 investors including ICICI Prudential MF, HDFC MF, Nippon MF, and Aditya Birla MF. A notable exception was SBI Mutual Fund, regarded as one of the more selective institutional investors. Outside the anchor book, retail and institutional demand was subdued, underscoring market caution. On Day 2 (October 6), the issue was subscribed only 13%. The issue is set to close today, October 7.

It will be interesting to watch how the issue closes today, Subramanian cautioned that “Listing is not the end of scrutiny. It’s when governance really gets tested in public.” He said, if the issue goes through, investors should track four factors: whether audit qualifications are resolved, whether promoters re-pledge shares post-listing, how ongoing losses are funded, and how pending promoter cases progress.