Credit: Special arrangement
According to a CBRE report the office space market has rebounded in the first half of 2024, with flex offices contributing the most to this growth. In this marketscape, Bengaluru’s managed offices and coworking spaces company BHIVE Workspace has stepped outside its home turf for the first time, entering Mumbai.
Armed with a clientele of 850 companies, the company is all set to tap the bustline IPO market next year. Talking to DH’s Anushree Pratap, BHIVE’s CEO and founder, Shesh Rao Paplikar, elaborates on plans to double the company’s bottomline by FY27. Edited excerpts:
As co-working grows, how do you think commercial space will change?
About 30-40 per cent of India’s overall office space becoming flex leasing is a strong trend that I see.
When we started 10 years ago, our competitors were focusing on startups as customers as their uncertainty is high. Now, even large companies are going with flex leasing. Between corporates and startups, we currently have a close to 50-50 distribution but during the pandemic, we were 75 per cent startups and one-fourth corporates. Reflecting the office market in general, we expect corporate flex-leasing to increase further.
Another trend is AI leading to smaller teams in the future for which flex leasing makes more sense. Companies are also moving towards having different locations for front offices and back offices for different teams.
Can you tell me more about your expansion plans?
In Bengaluru, we are the third biggest flex leasing player with 29 centres. This includes our recently signed two properties. One is a Rs 6.5 crore investment coming up in Indiranagar, expected to launch in March-April. The other is a phase-wise project in Whitefield which will be 2 lakh square feet, expected to launch in May-June. This will be 4000 seats with a Rs 24 crore deployment.
We entered Mumbai with one centre. We have invested close to Rs 15 crore, including future deployment in the same property. By 2030, we will have a decent presence in the top six cities. For every million square feet, we may need an investment of Rs 150 crore.
Can you shed some light on your growth strategies?
Our preference is to go to locations where our competitors, and thus co-working as an industry, are doing well. BHIVE, unlike many of our competitors, has a location-first strategy when we sign a property rather than client-first.
We are also doing a lot of tech investments with the tech company we acquired last year, Praemenio. One is the customer interface. We are going to launch an upgraded app for our customers in a quarter from now.
How is the IPO process going?
We are looking at Rs 800 crore as the IPO’s size. The primary is Rs 500 crore. The remaining Rs 300 crore will be offer for sale (OFS) by existing shareholders. The market cap is aimed at Rs 2000 crore. We plan to launch it in the second half of 2025, towards the end.
Next June-July is what we are targeting for filing the draft red herring prospectus (DRHP) with Sebi. This could be plus or minus two months. We are already in the process of becoming a public limited. We have also moved to BDO as our auditor.
Can you tell me about the pre-IPO?
Right now is the pre-IPO round of Rs 200 crore. What we see is that this is a good-to-have situation, not a requirement. A pre-IPO can shore up your bank balances, help certain ratios like equity ratio. That may help us get better valuation. But we are financially covered to go for an IPO. We are talking to private equity companies and family offices for the pre-IPO. From conversations to hitting the bank, there is always at least a 4-month gap. Also, a lot of high net worth individuals (HNIs) are investing.
What are your profit and revenue expectations for the current financial year (FY) and going forward?
In FY25, we will be ending at around Rs 300 crore of revenue. We expect an earnings before interest, taxes, depreciation, and amortisation (EBITDA) of close to Rs 90 crore and profit after tax (PAT) of Rs 30 crore. This is up from FY24 when our revenue was Rs 186 crore and we made Rs 48 crore EBITDA and Rs 12 crore PAT. In FY26, we will be probably heading closer to Rs 350 crores. We expect profit and EBITDA to be at a similar level as FY25. We will slow slightly because of the IPO. But the following year, we are looking at a revenue of Rs 600 crore. Once the IPO is done, a lot of sign-ups will happen next year, for which the impact will come in FY27. From this year versus FY27, we would have at least doubled.