WeWork Inc.’s plan to sell the 27% it holds in its Indian unit and exit the country has collapsed, according to three people aware of the matter. This comes after the Competition Commission of India (CCI) had approved the proposal.
Along with the bankruptcy-hit WeWork Inc., the coworking firm’s local partner WeWork India, promoted by Bangalore-based realtor Embassy Group, was also slated to divest a 13% stake to a consortium of investors including the Enam group family office, A91 Partners and CaratLane founder Mithun Sacheti in a Rs 1,200 crore secondary transaction, as reported first by ET on April 22. The Indian real estate group holds 73% in the India unit while WeWork Inc. owns the rest.
The deal cleared by the regulator, as per a June 18 order, involved a two-step process that would see WeWork Inc. and Embassy together selling a stake of about 40% to new investors.
“The transaction didn’t go through due to a valuation mismatch even after the regulatory nod came in from the Indian antitrust body,” said one of the persons cited. The Embassy Group was supposed to acquire the 27% stake held by WeWork US in the India business and subsequently bring in investors as the company prepared a plan to go public.
Karan Virwani, CEO of WeWork India, is holding talks with 360 One, formerly IIFL, to buy some part of the 27% stake held by WeWork Inc in the Indian unit, according to the people cited above.
“Embassy will pick up financing from 360 One by leveraging their shareholding,” the person said on condition of anonymity as the talks are private.
The development comes on the back of a successful public offering by WeWork India’s rival Awfis in May signalling a turnaround in the sector. The Rs 600 crore Awfis IPO was oversubscribed 108 times. The company’s share price has shot up over 83% since listing compared from its issue price of Rs 383. It ended Thursday at Rs 702 on the BSE, up/down xx%.
“The selling party did not want to go ahead at the agreed valuation seeing the kind of demand generated by the Awfis listing and the overall buoyancy in the public markets,” said one of the persons cited above.
WeWork Inc said it doesn’t comment on speculation. Virwani declined to comment saying the queries were “speculative” in nature. A91 and Sacheti did not respond to ET’s queries. A spokesperson for 360 One declined to comment.
In 2017, WeWork entered into a partnership with the Embassy Group to start its operations here.
With a new WeWork US management in place, there could be a change in strategy for the India market, said a person close to the matter. Softbank-backed WeWork Inc. was cofounded by Adam Nuemann and Miguel McKelvey in YEAR. It filed for Chapter 11 bankruptcy in the US last November and appointed John Santora as chief executive in June.
This is the second major deal in the new economy space that has fallen through in recent times having obtained CCI clearance after National Investment and Infrastructure Fund’s planned investment in FirstCry.
The office-sharing sector has seen a significant uptick in India over the past year, in contrast with most other markets. Apart from the Peak XV Partners-backed Awfis, other coworking platforms in the country include TableSpace, Indiqube, CoWorks, 91Springboard and Bhive.
For the first six months of FY24, WeWork India clocked a revenue of Rs 831 crore, up 40% on-year. It has yet to file its audited FY24 financials with the Registrar of Companies. While Awfis saw operating revenue rise 37% to Rs 258 crore for the April-June period from Rs 188 crore in the same period a year ago, net profit was Rs 2.8 crore against a loss of Rs 8.3 crore a year ago.
In a recent research note, Crisil said Indiqube registered a revenue of Rs 841 crore in FY24, racking up 42% growth while profit more than tripled to Rs 67.7 crore.
