Smartworks Coworking Spaces Limited , India's largest managed office platform, has received a significant boost to its credit profile. CARE Ratings Limited has upgraded the company's long-term bank facilities rating to CARE A; Stable from CARE BBB+; Positive, while the short-term bank facilities rating has been raised to CARE A1 from CARE A2.

Key Factors Driving the Upgrade

The two-notch upgrade reflects several positive developments in Smartworks' business and financial profile:

1. Operational Growth: The company has demonstrated continued improvement in its scale of operations, expanding its space under management and maintaining healthy occupancy levels.

2. Successful IPO: Smartworks' listing on the BSE and NSE, following a successful initial public offering (IPO), has significantly improved its financial risk profile and capital structure.

3. Strong Market Presence: The company has established a robust presence in the flexible, fully serviced workspace sector across India, with backing from reputable investors.

4. Diverse Client Base: Smartworks boasts a diverse and reputed tenant profile, which helps reduce tenant concentration risk.

5. Financial Safeguards: The presence of an escrow mechanism and debt service reserve account (DSRA) provides additional comfort to lenders.

6. Stable Cash Flows: The company has demonstrated stable operating cash flows through timely collection of rent.

Operational Highlights

Smartworks operates:

• Over 10.1 million sq. ft. of operational space
• Across 56 centers in 15 cities
• Serving more than 730 customers

Challenges and Constraints

Despite the positive outlook, CARE Ratings noted some constraints:

1. Continuous accounting losses (primarily due to IND-AS accounting) in the past, resulting in a leveraged capital structure.
2. Significant expansion plans that pose market risks.
3. Potential risk of lease non-renewal after the lock-in period.
4. Exposure to macroeconomic conditions and the cyclical nature of the competitive real estate industry.

Future Outlook

The 'Stable' outlook assigned by CARE Ratings indicates an expectation of continued improvement in Smartworks' financial performance in the near-to-medium term. This outlook is supported by the anticipated healthy growth of space under management and comfortable occupancy levels.

The credit rating upgrade is likely to enhance Smartworks' financial flexibility and potentially lower its borrowing costs, supporting its growth plans in the competitive flexible workspace market.

Smartworks Coworking Spaces Limited , a prominent player in the flexible workspace sector, has reported strong financial results for Q2 FY26, demonstrating significant growth and improved financial health.

Financial Highlights

Smartworks achieved impressive financial results in Q2 FY26:

• Revenue reached ₹4,248.00 million, representing a 21% year-on-year growth and a 12% sequential growth.
• Normalized EBITDA increased by 46% year-on-year to ₹696.00 million, with a margin of 16.4%.
• The company's net debt turned negative at ₹590.00 million, indicating a strong financial position.
• Operating cash flow reached ₹614.00 million.
• Since its IPO, Smartworks has reduced its gross debt by nearly 45%.

Operational Achievements

Smartworks continues to expand its portfolio and improve its operational metrics:

• Signed a landmark 815,000 sq.ft. campus at Eastbridge, Mumbai, becoming the world's largest managed office campus operated by any flex-space company globally.
• Total portfolio stands at 12.7 million sq.ft. across 14 cities.
• Operational footprint of 9.1 million sq.ft. across 54 centres.
• Serves 760 corporate clients, with 90% of rental revenue coming from large enterprises.
• Maintains an 81% overall occupancy rate.

Credit Rating Upgrade

Reflecting its improved financial performance, CareEdge Ratings upgraded Smartworks' rating to A- Stable from BBB+ Positive.

Future Outlook

With its strong financial results, expanded portfolio, and improved credit rating, Smartworks is well-positioned in the flexible workspace market. The company's focus on serving large enterprises and maintaining high occupancy rates suggests a stable revenue stream.