Awfis Space Solutions Ltd (AWFIS) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, you have been connected to the Q2 and H1 FY27 earnings conference call of Awfis Space Solutions Limited. Please stay connected, the conference will begin shortly.
Moderator: Ladies and gentlemen,
Moderator: Day and welcome to Q2 and H1 FY '27 earnings conference call of Awfis Space Solutions Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note, this conference is being recorded. I now hand the conference over to Mr. Rahul Kundnani from Nirmal Bang Institutional Equities. Thank you and over to you, sir.
Rahul Kundnani (Nirmal Bang Institutional Equities): Thank you, Nazneen. Good morning, everyone. On behalf of Nirmal Bang Institutional Equities, I would like to welcome you all to Q2 FY '27 earnings call of Awfis Space Solutions Limited. The management is represented by Mr. Amit Ramani, Chairman and MD, Mr. Sumit Lakhani, CEO, Mr. Sumit Toshniwal, the CFO. I will now hand over to the management for their opening remarks after which we will open the floor for Q&A. Over to you, sir.
Amit Ramani (Awfis Space Solutions Ltd): Thank you, Rahul. Thank you and good morning, everyone. A very warm welcome to all of you on our Q2 H1 FY '27 earnings call. I am joined by Mr. Sumit Lakhani, our CEO, Mr. Sumit Toshniwal, our CFO, and SGA, our investor relation advisor. Our results presentation is on the exchanges and on our website, and I hope you have had a chance to go through it. Let me give you a little color on the industry landscape. India's Grade A office stock across the top 7 cities now stands at 887 million square feet, and demand is keeping pace with this scale. Gross leasing in the first 9 months of 2026 reached 54.4 million square feet, up 7% year-on-year, with 18.7 million square feet absorbed in September quarter itself. What is striking is that this came in a quarter where new supply jumped 79% sequentially to 19.2 million square feet, and vacancy still fell by 42 basis points to 15.9%. When record supply and falling vacancy arrive together, it means occupiers are absorbing quality space as fast as it is delivered. Average quoted rents rose 6.9% year-on-year to about ₹115 per square foot per month. Improving the demand for Grade A+ office space is supporting rental growth in key micromarkets. This reinforces the advantage of operators with established developer partnerships and a well-positioned supply pipeline, while making disciplined sourcing increasingly important for our for our new capacity. Flex is now a mainstream route to that space. Flexible workspace operators leased 12.6 million square feet in 9 months, close to a quarter of all leasing in the market, and on the conventional side, technology occupiers took 38% of the space and BFSI took 20%. Both of these sectors are core to our client base. So the mix of who is leasing is moving towards us and not away from us. Flex is no longer a startup enabler. It is a core to real estate strategy for large enterprises. And the operators who can offer a Grade A+ address, enterprise-grade fit-out, and a national network are the ones taking that share. GCCs are the anchor of this demand. India now hosts 2,100-plus GCCs, operating 3,700-plus units, and employing 2.36 million people, and generating about $98 billion in revenue. And in August, we published The Great Workplace Reset with Zinnov, on how these centers are redefining work, workforce, and the workspace. GCC leased about 8.7 million square feet in the September quarter, 41% of the market, and about 28 million square feet in 9 months, 40 which is 42% of the to- overall space taken. Three things in GCC data matter for us. First, concentration. Hyderabad took 37% of GCC leasing in the quarter and Bangalore 28%, with Chennai and NCR at 11% each. And these are cities where our network is deepest. Second, quality. 58% of leasing in the 9 months was Grade A+ assets, which is exactly
Amit Ramani (Awfis Space Solutions Ltd): The work these centers do has changed more than their numbers. As a GCC moves from cost center to product and AI hub, the work space becomes an operating decision taken for speed, talent, scalability rather than a real estate decision taken on rent per square feet. The message from the market is simple, enterprise and GCCs want high quality, flexible, ready-to-use space in the best micro-markets of Hyderabad, Bangalore, Chennai and NCR. And they want one partner who can deliver it at speed across these cities. That is a platform we have built and the rest of the call is about how it performed in the quarter. Turning to our performance, we are pleased to report another quarter of consistent growth driven by continued demand from large enterprises and GCCs, along with focus on premium centers and operational efficiency. Normalized revenue for Q2 FY27 grew by 26% year-on-year to 451 crores and cash EBITDA grew 45% to 49 crores. The cash EBITDA margin stood at 10.8%, an improvement of 140 basis points year-on-year and 70 basis points over the previous quarter. For the first half of the year, normalized revenue was at 888 crores, up 30% year-on-year and cash EBITDA was 93 crores, up 40% at a margin of 10.5%. Cash EBITDA reflects the operating profitability of our workspace model. The reported EBITDA primarily includes accounting effects under Ind AS 116, which are detailed in the presentation. On a reported basis, revenue was 439 crores for the quarter and 864 crores for the first half, up 20% and 23% respectively. Reported EBITDA was 174 crores and 336 crores, up 31% and 30%, with margins of 39.6% and 38.9%. Profit before tax doubled to 31 crores for the quarter and 56 crores for the first half of the year. The growth continues to be self-funded. Normalized operating cash flow for the first half was 100 crores or 1.08 times cash EBITDA, and we remain net cash positive with net debt to equity at -0.12 times compared with -0.08 times at the end of June. Our coworking business grew at 31% year-on-year to 376 crores in the second quarter and 34% to 740 crores in the first half. Driven by sustained demand from large corporates, MNCs, and multi-center clients, together with the continued premiumization of our portfolio, with this continued premiumization of our portfolio, I'll come back to the drivers under our growth engines. Transform, our design and build business, contributed 75 crores in the second quarter and 149 crores in the first half, growing by 8% and 16% year-on-year respectively. Quarterly transform revenue moves with project delivery milestones, so we assess the business on a half yearly and a order book basis. Third-party clients now account for 93% of all transform revenue, and the order book and advanced pipeline stands at 220 crores, which gives us a good visibility for the second half of the year. Mandates won during the first half include a global technology center in Gurgaon, a renewable energy group in Delhi, a diversified pharmaceutical group in Noida, and a global customer experience major in Gurgaon, each between 40 to 100,000 square feet. On the network, we added six centers and approximately 7,000 gross seats during the quarter, taking the total supply, which is our operational plus under fit out, to 254 centers and approximately 1,74,000 seats. And occupancy rose on both measures, 84 to 84.1% at mature centers and 76.2% across the portfolio. Sumit will take you through the further details. Our GCC portfolio continues to scale, contributing to approximately 24% of our rental revenue. Our integrated offering across co-working, managed office, design build, and allied services allows us allows us to be a GCC's single partner for from its first 25 seats in India to its multi-city managed office mandate. Our five growth engines, let me give you a brief progress update on each of them. Our five growth engines which we set out at the start of the year, first, GCC demand. Our GCC client base grew to continues to grow, and the life cycle we described in August is now visible in individual accounts. A US-headquartered global e-commerce major entered India through 100 seats, incubating in our elite Awfis in Bangalore, which we opened in 35 days, and hence since scaled to 2,000 FTEs captive operations with Awfis as its single partner. In Chennai, a Fortune 500 group has signed a GCC mandate of more than 1,000 FTEs with the
Amit Ramani (Awfis Space Solutions Ltd): going live in Q4 of FY '27. Entry mandates for the size taken by the first-time entrants are clearest signs that GCC now see flex as a way into India rather than a stop gap. Second, premiumization at the scale. The gold and elite portfolio has grown from 26 centers a year ago to 39 today. 29 gold and 10 elite centers and premium seats are up 58% year-on-year over 33 to over 33,000. During the first half, we strengthened our presence in Pune, Bangalore, Mumbai, Delhi NCR with new grade A+ centers built to our latest 6.0 design, which raises space utilization and supports higher realization per seat. The economics are following the footprint. These centers are signing incremental seats at around 35% higher pricing than our flagship product. And they are front door to larger enterprise mandates. As this cohort matures, its contribution to realization and margins will keep building. Third, multi-format supply. Our three pillars, each do a different job. Managed aggregation remains the core, now with stricter filter on asset quality and realization, and increasingly through developer partnerships where landlord funds the CapEx and we run the center. Straight lease is reserved for handful of ultra-premium anchor assets in core micro markets, where flagship addresses justifies the balance sheet commitment. And partial managed office, where an enterprise anchor commits to half or more of the seats before we sign in, is changing how we open new centers. Anchor economics from day one and higher starting occupancy that than in the past. Fourth, organic growth. We sold approximately 25,000 seats in the first half of the year, and growing share of that came from expansions within existing client base. Another metric we have focused on this year is lock-in tenure, which is up 4 months year-on-year to 27 months across the portfolio, 3 months to 33 months for clients with more than 100 seats. Further, our in-house AI-enabled renewals tool now flags expires and expansions signals well ahead of time, so renewals are managed productively, proactively rather than at the end of the contract. Longer lock-ins and earlier renewals together give us a longer contracted revenue base give going into every quarter. Fifth, value beyond flex. I covered transform numbers earlier, so two observations only: The mandates we are winning are larger and more strategic. Four of the five wins in the first half were between 70 to 100,000 square feet, and increasingly for multi-city and national fit-outs rather than single sites. And the loop runs in both directions. Flex relationship convert into transform mandates, and transform clients come back to us for flex and managed office. Allied services across IT, F&B, transport, business support are growing alongside the enterprise mix and the deepening our share of each client's workspace spend. Taken together, these five engines are not separate initiatives, but one operating model. Premium supply attracts enterprise and GCC demand. That demand deepens to managed office and the workplace solutions. And every such relationship makes the next partnership and the next center easier to sign. I'll talk briefly about financial discipline. All of this growth continues to be funded with discipline. Since our listing in Q1 FY '25, we've added close to 64,000 net operational seats from 100,000 to 1,64,000, while deploying over 460 crores of CapEx in new centers. Every rupee of that has come from internal accruals. The 128 crores we raised at IPO remains the only equity we have taken since listing. Over the same period, quarterly revenue has grown from 258 crores to 458 crores on normalized basis, a CAGR of 28.1%, and we have stayed net cash throughout. Outlook for FY '27, looking to the second half, we reiterate the full-year guidance we gave in August. We are on track to do add about 22 to 25,000 gross seats in FY '27, and we expect the co-working revenue to grow 23 to 25% and transform by around 20%, taking total revenue past 1,800 crores. On profitability, we expect full-year cash EBITDA of 190 to 200 crores, with the second half stronger than the first as occupancy at recently-launched centers continues to build and the premium cohort matures. With that, I will now hand over to Sumit Lakhani to take you through the operational highlights. Over to you, Sumit.
Sumit Lakhani (Awfis Space Solutions Ltd): Thank you, Amit. And good morning, everyone. Let me walk you through the operational highlights for Q2 and H1 FY '27. As of 30th September 2026, Awfis operated 244 centers across 18 cities with another 10 centers under fit-out.
Sumit Lakhani (Awfis Space Solutions Ltd): total supply to 254 centers. Including signed LOIs, signed supply stands at 270 centers. On seats, operational capacity rose to over 164,000 from approximately 159,000 at the end of June. Including centers under fit-out, total supply stands at approximately 174,000 seats across 8.7 million sq ft and including signed LOIs, signed supply is approximately 188,000 seats across 9.4 million sq ft. During the quarter we added approximately 7,000 gross seats and launched six new centers, while exiting around 2,200 seats across four centers as part of ongoing portfolio optimization. For the first half that is approximately 12,000 gross seats and 13 new centers. Every one of them in a grade A or A plus asset in a high demand micro-market. Our Gold and Elite footprint grew to 39 centers from 37 at the end of June with 10 Elite and 29 Gold centers. Managed aggregation remains a strong component of the network at 57% of the centers. Occupancy at centers operational for more than 12 months rose to 84.1% from 83% in the first quarter and blended portfolio occupancy improved to 76.2% from 76%. That both measures moved up in a quarter of net seat addition tells you our new centers are filling fast. Our active client base grew to over 3,700 clients. Across the portfolio weighted average client tenure is 38 months and lock-in tenure 27 months up from 27 months at the end of June. For clients with more than 100 seats, tenure is 49 months and lock-in 33 months, the latter up three months year-on-year. 77% of our seats have tenure of 24 months or more and further 18% between 12 and 23 months. So, 95% of the base is committed for at least a year. Longer lock-ins are a deliberate priority because they translate directly into contracted revenue and steadier occupancy through cycles. Enterprises and MNCs make up 64% of our client base, SMEs 25% and startups 10%. By industry, technology accounts for 39% of our client mix, professional services 20%, manufacturing 13%, BFSI 12% and healthcare and life sciences 7% with the balance across other sectors. No sector other than technology accounts for more than a fifth of the space and resilient sectors make up over 40% of it. By domicile, 51% of our clients are India-headquartered, which drives faster conversions and shorter ramp cycles while 44% are headquartered in North America or Europe, 30% and 14% respectively, bringing structured mandates and longer tenures. By size, clients with 500 or more seats account for 37% of our seats and clients with up to 100 seats, a further 35%, which gives us a steady funnel of clients who grow into managed office mandates. On GCCs, we serve more than 105 unique GCC clients across nine cities contributing approximately 24% of rental revenue. Beyond the mandated beyond the mandates which Amit described, we invested in the GCC ecosystem through the first half. We sponsored the GCC Conclave in Bangalore, hosted a GCC leaders lunch hour in Pune, co-authored the industry report with Zinnov and launched a GCC podcast series with industry practitioners. These are how first-time entrants find us and they feed the pipeline of nano and micro mandates that later scale. Overall, the network is growing where enterprise demand is deepest, occupancy is rising on both measures and the client base is becoming longer tenured and more committed. With that, I'll hand over to Sumit Roshlani for the financial update.
Sumit Toshniwal (Awfis Space Solutions Ltd): Thank you, Sumit, and good morning, everyone. Let me take take you through the financial performance for Q2 and H1 FY27. As introduced last quarter, alongside our reported IndAS financials, we now report cash EBITDA to give investors a clearer view of underlying operating performance. The metric and its reconciliation are on slide 20 to 22 of the presentation and consistent with last quarter have been validated by MSKA & Associates LLP under an agreed-upon procedure engagement.
Sumit Toshniwal (Awfis Space Solutions Ltd): Q2, reported revenue from operations under IndAS was 439 crores, up 20% year-on-year. Co-working and allied services grew 22% to INR 364 crores. And transform revenue grew 8% to 75 crores. Reported EBITDA was 174 crores, up 31% year-on-year. And profit before tax was 31 crores, up 91% year-on-year. Under IndAS 116, certain long-term lease arrangements are accounted for as finance leases. Which affects the timing of the revenue recognition. Adjusting for this, normalized revenue was 451 crores, up 26% year-on-year. After adjusting for finance lease accounting, deducting actual cash lease rentals paid during the quarter, and excluding certain non-cash cost items, cash EBITDA was 49 crores. Up 45% year-on-year, with cash EBITDA margins of 10.8%. The operating PBT was 13 crores. For first half of the year, reported revenue from operations under IndAS was 864 crores, up 23% year-on-year. Co-working and allied services grew 25% to 715 crores. Transform grew 16% to 149 crores. Reported EBITDA was 336 crores, up 30% year-on-year, and profit before tax was 56 crores, up 108% year-on-year. Under IndAS 116, as explained earlier, certain long-term lease arrangements are accounted for as finance leases, which affect the timing of the revenue recognition. Adjusting for this, normalized revenue for first half of the year was 888 crores. Up 30% year-on-year, after adjusting for finance lease accounting, deducting actual cash lease rentals paid during the quarter or during the first half of the year, and excluding non-cash cost. Cash EBITDA was 93 crores, up 40% year-on-year, and cash EBITDA margin of 10.5%. The operating PBT for first half of the year was 25 crores. Talking about balance sheet and returns, our balance sheet remains strong. We continue to be net cash positive with net debt to equity of -0.12x. And with a net debt negative of 73 crores. Our fixed asset turnover ratio was at 1.5 times. For first half of the year, the total spend on Capex was 113 crores. Our incremental cost of borrowing stays at 8.5%. And our credit rating stays at A+ with a stable outlook. Overall, the quarter reflects healthy top-line growth. A stable balance sheet and margin growth. We expect to build through the second half. With that, we conclude our opening remarks and open the floor for questions.
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