Will Awfis Space Solutions see healthy listing gains on Thursday?

Awfis Space Solutions

Awfis Space Solutions' shares are expected see around 25-30 percent gains on their stock market debut on May 30, despite the company being a loss making one and reporting negative cash flows. According to experts, the robust IPO subscription numbers, asset light business model, healthy growth prospects, and first mover advantage are some supporting factors for the likely listing gains.

The Rs 599-crore initial public offering recorded a whopping 108.56 times subscription during May 22-27, with investors buying 93.68 crore equity shares as against offer size of 86.29 lakh equity shares. Non-institutional investors bid 129.81 times the allotted quota, qualified institutional buyers 116.95 times and retail 54.58 times the portion set aside for them.

The workspace solutions provider's IPO comprised of a fresh issue of shares worth Rs 128 crore, and an offer-for-sale (OFS) of 1.22 crore equity shares worth Rs 470.93 crore at the upper end of price band of Rs 364-383 per share.

"We believe that the listing price for the IPO could be in the range of Rs 500-520 per share (against issue price of Rs 383 per share) based on the asset light business model and healthy growth prospects," Narendra Solanki, Head Fundamental Research - Investment Services at Anand Rathi Shares and Stock Brokers said.

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Awfis adopted two differentiated models for sourcing and procuring workspaces, namely the straight lease (SL) model and the managed aggregation (MA) model. It offers co-working solutions, and enterprise solutions as part of space solutions segment, accommodating diverse needs from individual desks to customized office spaces for start-ups, small and medium enterprises (SMEs), large corporations, and multinational companies. Clients can rent these spaces for as short as one hour or as long as several years.

It is ranked first among the top 5 benchmarked players in the flexible workspace segment with presence in 16 cities in India. Further, it is present in the maximum number of micro-markets in India.

It is asking for a market capitalisation of Rs 2,660 crore at the upper price band.

"The IPO subscription demand has come due to its first of its kind businesses getting into listing space and early mover advantage to grab the investors opportunity. Hence, it is indicating a good room for healthy listing gain in the range of 25-30 percent against the issue price of Rs 383 per share," Prashanth Tapse, Research Analyst, Senior VP Research at Mehta Equities said.

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He believes the healthy listing is justified on the back of the company's ranking number 1 among the top 5 benchmarked players in India in the flexible workspace segment.

Despite challenges, management is showing confidence that the company can turn net cash positive by the next fiscal year. They anticipate bright prospects ahead, driven by the significant demand and supply gap in the flexible workspace segment in which Awfis operates, Tapse said.

In the grey market, Awfis IPO shares were trading at around 22-30 percent premium over the issue price, the market observers said. The grey market is an unofficial platform for trading in IPO shares till the listing.

"Current grey market premium is reflecting some investor interest," Shivani Nyati, Head of Wealth at Swastika Investmart said.

While the high subscription suggests investor interest in the growing workspace sector, Awfis' financials necessitate a neutral stance. In fact, the financial situation warrants caution, she feels. Despite impressive revenue growth, the company struggles with achieving profitability. Negative cash flow and a highly competitive market pose additional challenges.

The New Delhi-based company recorded good performance on the topline, but has been posting losses on the bottomline. It reported net loss of Rs 46.6 crore for the financial year ended March 2023 as against  Rs 57.2 crore net loss a year ago. Revenue from operations during the same period increased by 112 percent to Rs 545.3 crore from Rs 257 crore.

Despite net loss, the operating performance remained strong. EBITDA (earnings before interest, tax, depreciation and amortisation) grew by 127.7 percent on-year to Rs 155.6 crore with margin expansion of 190 bps at 28.5 percent in FY23.

Loss for the nine months period ending December 2023 stood at Rs 18.9 crore on revenue of Rs 616.5 crore.

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