Smartworks Coworking Spaces Limited has filed its quarterly monitoring agency report for the quarter ended December 31, 2025, under Regulation 32 of SEBI's Listing Obligations and Disclosure Requirements Regulations, 2015. The report, prepared by CARE Ratings Limited, provides a comprehensive overview of the company's IPO fund utilization progress.

IPO Fund Utilization Overview

The coworking space provider utilized ₹34.46 crores during Q3 FY26 from its initial public offering proceeds of ₹445.00 crores. This brings the total cumulative utilization to ₹272.30 crores, leaving ₹172.70 crores unutilized as of December 31, 2025.

Object-wise Fund Deployment

The company's IPO proceeds were allocated across four primary objectives, with varying levels of completion:

Debt Repayment (Completed): The company successfully completed the repayment of certain outstanding borrowings worth ₹114.00 crores during Q2 FY26, fully achieving this objective.

Capital Expenditure for New Centers: For fit-outs and security deposits of new centers, the company spent ₹23.25 crores during Q3 FY26, bringing total utilization to ₹64.50 crores against the allocated ₹225.84 crores. The remaining ₹161.34 crores will support ongoing expansion activities.

Deployment of Unutilized Funds

The company has invested its unutilized proceeds in fixed deposits across multiple banks to earn returns while maintaining liquidity. The deployment includes:

• Bank Accounts: ₹14.56 crores in HDFC Bank public issue and monitoring accounts
• Fixed Deposits: ₹163.80 crores across HDFC Bank, Kotak Mahindra Bank, AU Small Finance Bank, and Jana Small Finance Bank
• Interest Rates: Ranging from 2.75% to 7.00% with varying maturity dates

The fixed deposits are strategically distributed with maturity dates spanning from January 2026 to September 2026, ensuring regular liquidity for operational requirements.

Regulatory Compliance and Monitoring

CARE Ratings Limited confirmed that the utilization of proceeds during Q3 FY26 aligns with disclosures in the offer document. The monitoring agency reported no deviations from the stated objectives and confirmed that shareholder approvals were not required as there were no material deviations.

The report noted that while the company has incurred net losses for the past five financial years, it has maintained cash profits during those periods. This information was highlighted as relevant for investor decision-making.

Implementation Timeline

The company remains on track with its implementation timeline:

• Debt repayment completed within Fiscal 2026 as planned
• Capital expenditure for new centers progressing toward Fiscal 2027 target
• General corporate purposes utilization ongoing within Fiscal 2026
• No delays reported in any of the stated objectives

The monitoring agency report demonstrates Smartworks' systematic approach to deploying its IPO proceeds while maintaining transparency and regulatory compliance in its expansion activities.

Smartworks Coworking Spaces Limited delivered strong Q3FY26 results, demonstrating significant progress in its financial and operational metrics. The managed office platform reported revenue growth of 34% year-on-year to ₹4,721 million, marking its entry into a clear cash-compounding phase with improved margins, returns, and cash flows.

Financial Performance Highlights

The company's Q3FY26 performance showcased robust growth across key financial metrics. Revenue from operations reached ₹4,721 million, representing an 11% quarter-on-quarter increase alongside the strong 34% year-on-year growth.

Normalized EBITDA surged 86% year-on-year to ₹847 million, with margins expanding by 150 basis points quarter-on-quarter to 17.9%. The company achieved normalized profit before tax of ₹404 million, marking a 647% year-on-year increase and 65% quarter-on-quarter growth.

Milestone Achievement in Profitability

Smartworks achieved a significant milestone by turning Ind-AS PAT positive for the first time, reporting ₹12 million in Q3FY26. While the company has been profitable on a normalized basis for several years, this development reflects increasing alignment between operating performance and reported profitability as the portfolio matures.

Operational Scale and Occupancy Metrics

The company continued expanding its operational footprint while maintaining strong occupancy levels. Total Super Built-up Area (SBA) reached 15.3 million square feet, including leased SBA of 11.1 million square feet. The quarter saw addition of 2.6 million square feet in total SBA.

The company operates 63 total centres across 15 cities, with 55 leased centres currently operational. Seats retention rate remained strong at 93% for the quarter ended December 31, 2025.

Enterprise-Led Growth Strategy

Smartworks continued its focus on enterprise-led growth, with 90% of rental revenue contributed by enterprise clients. The 1,000+ seat cohort contributed 36% of rental revenue in Q3FY26, up from 35% in Q2FY26 and 29% in FY25. These large-format deployments come with longer tenures, with the 1,000+ seat cohort averaging 52 months total tenure and 38 months lock-in tenure.

Enhanced Capital Efficiency

Return on Capital Employed (ROCE) improved meaningfully from 14% in Q2FY26 to 21% in Q3FY26. This inflection demonstrates that incremental scale is translating into higher capital efficiency, supported by margin expansion, improving asset turnover, and disciplined capital deployment.

Strong Balance Sheet Position

Smartworks ended Q3FY26 net-debt negative at ₹(418) million, with gross debt reducing to ₹2,327 million from ₹3,446 million in Q3FY25. Cash and equivalents stood at ₹2,745 million. The company benefited from a two-notch credit rating upgrade to CARE A (Stable) from CARE BBB+ (Positive), reflecting improved financial profile and debt servicing ability.

Cash Flow Performance

Operating cash flow remained structurally healthy with OCF-to-EBITDA conversion above 1x. Normalized operating cash flow reached ₹1,009 million in Q3FY26, representing a 148% year-on-year increase. The strong cash generation reflects the enterprise-led billing cycles, stable receivables, and lower working-capital volatility.

Industry Diversification

The company maintains a diversified client base across industries, with IT, Technology & Software Development contributing 38% of Q3FY26 rental revenue, Business Consulting & Professional Services at 17%, Engineering & Manufacturing at 11%, BFSI at 8%, and others comprising 26%. This diversification reduces concentration risk while improving stability and predictability.