Indiqube Spaces Ltd. (Avoid)

Highlights

Indiqube Spaces Limited (ISL), incorporated in 2015, is a managed workplace solutions company offering comprehensive, sustainable, and technology-driven workplace solutions. Their diverse solutions range from providing large corporate offices (hubs, i.e., the main office of their clients wherein key functions, leadership teams, and primary operations are based, and is typically located in a central or strategic area) to small branch offices (spokes, i.e., smaller, decentralized office spaces of clients spread across different cities or regions) for enterprises and transforming the workplace experience of their employees.

ISL manage a portfolio of 115 centers across 15 cities, consisting of 105 operational centres and 10 centres for which they have executed letters of intent (LoI), covering 8.40 million square feet (mnsqft) of area under management (AUM) in super built-up area (SBA) with a total seating capacity of 186,719. They have expanded their portfolio by 3.46 mnsqft of AUM with the addition of 41 properties and 5 new cities between FY23 and FY25.

The company complement their solutions through backward and forward integration capabilities. While backward integration focuses on asset renovation, upgradation and customized build-to-suit models, forward integration enables them to provide B2B and B2C VAS to clients and their employees. These, coupled with their core offering of plug and play offices, enable them to serve the workspace value chain comprehensively.

ISL partner with landlords to not only lease new properties, but also transform non-institutional and aging Grade B properties into high-quality, green and modern workspaces. They upgrade these properties by integrating interiors, amenities, technology, and sustainability initiatives. As of FY25, such renovated properties comprise 2.48 mnsqft or 29.57 pct of total portfolio.

Out of the total proceeds of Rs. 7,000 mn, ~Rs. 4,627 mn would be utilized towards for funding capex of new centres. Rs. 930 mn would go towards repayment of certain outstanding borrowings availed by the Company. Rs. 943 mn would be utilized towards general corporate purpose and Rs. 500 mn would go toward existing selling shareholders of the company.

Key Highlights

• Flexible workspace solutions are becoming an integral part of the modern work culture, catering to diverse working styles and introducing flexibility to the commercial office market. The total flexible workspace stock ranging between 82 – 86 mnsqft by the end of CY2024, is forecasted to grow to ~140 – 144 mnsqft across Tier 1 cities by end of CY2027 with a CAGR of ~18 – 20 pct.
• ISL rentable centers have a total area of 6.26 mnsqft, with 5.68 mnsqft committed to clients, resulting in a committed occupancy rate of 90.73 pct. The company believe this high occupancy is a testament to their effective demand-driven strategies, proactive client engagement and ability to deliver flexible workspace solutions that align with the needs of modern businesses.
• Their property lease structures are aligned with client lock-ins, where landlords typically have a three-year lock-in period, while clients have a weighted average lock-in tenure of 33 months. This synchronization ensures operational stability and minimizes risks associated with early lease terminations. ISL lease structure also allows them to manage sales escalation provisions effectively, ensuring predictable cash flows.
• ISL has strategically adopted an asset-light model, focusing on leasing rather than owning properties. This model allows them to secure 10-year leases with a three-year lock-in period, extendable for another 10 years, ensuring flexibility and control in arrangements with lessors.
• ISL’s key growth strategies includes (i) Expand AUM by balancing market presence and micro market penetration (ii) Enhance average revenue per square feet through an integrated workspace solutions ecosystem (iii) Become a preferred workspace outsourcing solutions partner for enterprises (iv) Scale IndiQube Bespoke and offer comprehensive office interiors solutions (v) Expand Sustainability as a Service offerings (vi) Leverage technology to expand client-base.
• The sales of the company registered CAGR of 35.17 pct over FY23-25 while EBITDA grown by 61.40 pct CAGR and 45.93 pct CAGR over same period. In FY25 the company reported sales of Rs. 10,593 mn, which grew 27.54 pct YoY while EBITDA of the company rose 172.40 pct YoY to Rs. 6,165 mn. In FY25 company posted losses of Rs. 1369 mn, which fell from loss of Rs. 3,415 mn in FY24.

Key Risk

• ISL business is sensitive to real estate market fluctuations and they have witnessed a decline in occupancy rate from 83.68 pct in FY23 to 80.21 pct in FY24. Changes in commercial property prices can significantly impact their leasing costs.
• Shifts in work culture, such as the rise of remote and hybrid working models, could alter the demand for plug and play workspaces.

Financial Performance

Peer Comparison Based on FY25 Financials

Valuation

Indiqube Spaces Limited provides managed, sustainable, and tech-driven workplace solutions, aiming to transform the traditional office experience for modern businesses. The company enjoys good market share as well as preference amongst IT giants. At the upper end of the price band of Rs. 237, the issue priced at EV/sales of 5x of its FY25 sales. The issue appears to be fully priced. One can avoid this issue.

Disclaimer: The views shared in blogs are based on personal opinions and do not endorse the company’s views. Investment is a subject matter of solicitation and one should consult a Financial Advisor before making any investment using the app. Investing using the app is the sole decision of the investor and the company or any of its communication cannot be held responsible for it.