Smartworks Coworking Spaces Ltd (NSE: SMARTWORKS) Q1 2026 Earnings Call dated Aug. 12, 2025
Corporate Participants:
Neetish Sarda — Managing Director
Harsh Binani — Executive Director
Anirudh Tapuriah — Chief of Strategy & Investor Relations
Analysts:
Mohit Agrawal — Analyst
Girish Choudhary — Analyst
Shivkumar Prajapati — Analyst
Aayush Saboo — Analyst
Sriram Srinivasan — Analyst
Unidentified Participant
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Smartworks co-working Q1F26 Earnings Conference Call hosted by IRFSL Capital Services. 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 touch tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Mohit Agarwal from IIFL Capital Services. Thank you and over to you, sir.
Mohit Agrawal — Analyst
Thank you and good evening everyone. On behalf of IIFL Capital, I’d like to welcome everyone to the Maiden Earnings Conference Call for Smartworks Co-working Spaces. From the management, we have with us Mr. Neetish Sarda, Managing Director; Mr. Harsh Binani, Executive Director; Mr. Sahil Jain, Chief Financial Officer; Mr. Pratik Agarwal, Chief Business Officer; and Mr. Anirudh Tapuriah, Chief of Strategy and Investor Relations. I’d now like to hand over the call to the management for their opening remarks, followed by a Q&A. Over to you, Neetish.
Neetish Sarda — Managing Director
Good evening, everyone. Thank you for joining us for our first earnings call as a listed company. On behalf of Smartworks, we extend our sincerest gratitude to our investors, bankers, partners, and shareholders for their invaluable support throughout our IPO. The confidence you have placed in our company, our leadership, and us as founders have been instrumental in reaching this significant milestone. The over subscription of our IPO by nearly 14 times is a powerful affirmation of our vision and future growth, and we deeply appreciate this trust. As this is our first earnings call after listing, I will be using, I will be, I will begin by sharing more about Smartworks and the industry we operate in. Following that, we will outline our growth strategy and discuss our Q1 FY26 performance. Smartworks is India’s largest managed office platform by total square foot under management. In just 9 years, which includes more than 2 years of COVID we have expanded to almost 12 million square foot of space translating to over 275,000 work seats across 56 centers in 15 cities. For the first quarter of FY26, our revenue stands at INR3792 million, a 21% jump year on year. Our reported EBITDA and annualized RoCE stands at INR2410 million and 58% respectively. Our normalized numbers basis non-GAAP measures stood at an EBITDA of INR607 million, a 109% jump year on year, while having very healthy cash flows from operations of INR855 million, a 71% jump year on year. All of this with an annualized RoCE of 13% We have only raised 505,558 million INR of equity before the IPO. Before talking about our numbers, let me talk about our journey. From the very beginning, our vision and conviction was to create office spaces for the new age workforce. During our time in the USA, Kash and I witnessed firsthand the campuses of large multinational companies. We were truly captivated by the energy and vibrancy of the space and happiness of their employees. This is what inspired us to create Smartworks. While we started Smartworks as a co-working space, we evolved fairly early into a managed office platform. We saw a very distinct and compelling opportunity in India. While more than 70% of India’s supply was from standalone non-institutional landlords, majority of the demand actually came from mid to large enterprise clients. This gap led us to pioneer the managed office platform and yes, we created this category. In our platform, we take large bare shell buildings instead of just floors or on these from landlords and transform them into Smart Works branded campuses with all aspiration amenities like cafes, crashers, gyms, indoor and outdoor sports zones and much more. Our focus is on mid to large enterprises with more than 85% of our revenue coming from enterprise clients. Majority of these clients commit to more than 300 feet with Smartworks. Before talking more about Smartworks, let me take a moment to talk about the industry. According to market estimates, India’s commercial real estate is currently around 1 billion square foot of office space, which 800 million square foot was only added in the last 20 years at a CAGR of 8.6%. The overall market is projected to grow even faster adding the next billion square foot in just 10 to 15 years. Morgan Stanley reports that India is set to become the world office to the world, with increasing GCCs and international companies establishing a presence in India. Flexible workspace is the fastest growing segment within the commercial real estate. In a short span of 10 years, it has grown to over 100 million square foot, and is projected to further grow at a CAGR of 18 to 20%. This rapid growth of the entire segment reflects a fundamental shift in customers’ preference for flexible workspace and the future of offices. Smartworks has outpaced the segment and grown 1.5 times faster at a CAGR of 38% in the last 3 years. Just in the last 3 months, we have added more than 1.1 million square foot of space. Our platform seamlessly integrates all stakeholders, whether it is our landlords, clients, their employees, or our vendor partners. Our landlords benefit from guaranteed rent, which makes them increase their exposure with us. 25% of our centers are from developers or landlords who have multiple buildings to Smartworks. With majority of our campus from non-institutional landlords, we have now broken barriers by working with large institutional developers such as DLF, Raheja and Tata Realty. For our 700 plus customers, they get flexible hassle-free office customized to their needs and delivered in less than 2 months across India at a value-centric price. With the likes of Google, Ernst & Young, FedEx, Concentrix and persistent systems and some of our customers, not only have our clients moved into SmartWorks campuses, but also expanded with us. I’ll give you an example. A Fortune 500 company that started with just 158 seats in 2003 with SmartWorks has expanded to almost 2,000 seats. by 2025, moving a significant portion of their India RE portfolio into the Smartworks ecosystem. Another example is of a company that started with in 2022, which was in just 3 years, has expanded 10X to 3800 seats across 6 cities.
Today, 30% of our revenue comes from multi-city clients. who are expanding within the Smartworks ecosystem. For the 150,000 employees of our clients, they get access to all aspirational amenities within our campuses. And for our rate contracted vendors, they get regular work throughout the year. These advantages for all our stakeholders has created a flywheel effect.
Now imagine the power of our platform. We’re talking about long-term annuity-like contracts with highly predictable cash flows from Fortune 500 companies, global MNCs, Indian conglomerates and well-funded startups. These aren’t just 1-off deals. They are stable recurring revenue streams. Think of it like a REIT, but with a host of office services such as design, fit-out, day-to-day operations and all amenities included achieved through an asset light and capital efficient model. All of this has enabled us to scale significantly. Our unique ability to take growing site at 2-3 million square foot of space every year by only taking 7 to 8 buildings and turning them into SmartWorks campuses. Our clients continue to choose us because of our model, directly addressing the pain points of traditional offices, which are the hassles of managing multiple landlords, multiple designers and vendors, long build times, high upfront costs, inflexibility and large admin teams managing day-to-day operations. All these works. So, what does Smartworks stand for? First, a standardized and scalable product where our customers get a uniform experience across India. Second, reliability, offices delivered in less than 2 months, a game changer in the industry which usually takes more than 6 to 9 months. Third, frugality, our industry leading cost structure, whether it is our capex or our opex, allows us to operate efficiently through economies of scale, standardization and modularity. Fourth, providing high quality campuses with all aspirational amenities remain our core strength. And finally, value driven pricing where all of this allows us to deliver a competitive and value for money pricing to our customers. I will now hand it over to Harsh.
Harsh Binani — Executive Director
Thank you, Neetish. Good evening, all. Let me now talk you through important features of our business. We are a high growth and rapidly scaling business, yet our model is delisted and insulated. Even when co-working industry was tested in COVID with multiple client move-outs due to work from home, and other restrictions, smart works remain strong. We did not surrender any of our large campuses during this period, reflecting the resilience of our business model and our astute building choices. Our mature centers maintained healthy occupancy of more than 85%, and we operated near breakeven levels. In fact, we were the only ones to expand during COVID Incidentally, we also had 1 of the highest footfalls during this period because of the host of amenities we offered, demonstrating the attractiveness of our product. In times of uncertainty, we are the most attractive partner for our clients because of our value pricing and flexibility. On the supply side, we are present across India with supply in 14 cities and Singapore. Today we cover over 94% of our spaces in all the important micro markets of the country. We work with a diverse range of developers and landlords ensuring there is no dependency on any single 1. Our supply responds directly to customer demand with strong pre-sale commitments from either our existing clients or new prospective ones, allowing us to scale up in a deliberate and a de-risk manner. Let us now walk you through the journey of a campus. Within 2 to 4 months, very efficiently, after leasing a large campus, we complete the common areas like cafes, corridors and the aspiration amenities and start to build out the offices for the pre-filled commitment. Post this, within the first 12 months, we aim to reach 65 to 70% occupancy and achieve breakeven. Post this, we recover our entire payback with the steady state ramp up of occupancy in about 30 to 32 months. Once our center stabilizes and recovers the capex, our margins continue to stabilize, but our RoCE continues to go up. Let us also share some perspectives on our demand strategy. Today, our demand is enterprise focused. It primarily comes from 300 plus seats clients. who commit to long tenures of over 48 months. They are highly sticky with a high retention rate of over 80%.
Moving forward, about 75% of rental annuity income will continue to come from the top 6 cities. While our top 10 clients currently account for less than 20%, this share will continue to come down. No single client of ours typically occupies more than 30% of our campus, further de-risking our model. On the sector side, we are very diversified. Although IP and ITES share is the largest in India’s commercial real estate, for us that is only 42% and has been progressively coming down. Today we serve a broad spectrum of sectors including engineering, logistics, healthcare, manufacturing and BSSI. And our clients include Fortune 500 companies, Indian conglomerates, MNCs and well-funded unicorns, so on and so forth. Our revenue model is primarily generated from annuity based rental income. In fact, 94% of our revenue is rental revenue which provides us significant stability and predictability with insight into the visibility into next few quarters and beyond. Today, our normalized EBITDA has been expanded and today stands at close to 16%. Going forward, our margin expansion will continue to happen. 1, as new centers mature over the second half of the year, occupancy and utilization will rise. Second, our margin will also expand through operating leverage in corporate and SG&A expenses. Today, our cost of doing business continues to reduce because of economies of scale and standardization. Our capex and opex continue to go down. As we continue to build our brand and effectively use our proprietary technology platforms, our cost of acquisition of customers and the sales cycle will also continue to reduce. Today, we leverage a vast design library having built and delivered over 1,000 offices. We’ve also built a proprietary platform called BuildX, which is a game changer. It brings together design, project, and procurement teams, enabling us to deliver office in a fast-paced 2 months, a big innovation in the industry. From the outset, we have been emphasizing as our core values. Our operating cash flow to EBITDA has constantly exceeded 1. As our EBITDA grows, our cash flows growth, which is essentially the funds available for reinvestment and growth. Based on Q1 26 estimates, our normalized cash flow from operations is approximately INR3400 million, which is representing a 42% growth from around 2,400 INR million in FY25. And this is expected to continue to accelerate with expanding margins in upcoming quarters. Moreover, the CAGR of normalized cash flow from operations from FY20 to 25 exceeds a whopping 80%. highlighting our strong and sustainable cash flow generation. While in the near term, on account of growth, our OCFT to EBITDA may go up to 1.4. In steady state, it will settle between 1.1 to 1.2 but continue to stay above 1. Our terms of trade are the most superior in the industry. with receivable days of just 5, driven by a strong client base and ERP driven collection systems. Our Roci has grown to healthy levels and doubled. Today it stands at more than 13%. Given our focus on cash flows and our capital efficiency, We believe that in the next 2 years, we can double our RoC with further upside projected over the next 5. We believe our industry is unique with in-depth accounting and different accounting policies being followed across the industry. 1 common unified way to measure RoC is to computed basis cash flows. Here is where you can see the North Star of Smartworks shine. We have the best in class metrics with cash O/C upwards of 47%. And finally, we’ve eliminated asset liability mismatch for at least the next 2 years and this will continue to remain as we scale up. Let us also share some perspective on our growth strategy going forward. In terms of growth, we already have visibility to reach 12 million square feet. At this scale, we foresee that we will be in self-sustaining capex mode, which allows us to grow by 25 to 30% year on year without any additional funding. With our strong cash flow generation, the company will continue to have healthy liquidity and cash balances in the near term. We have scaled up meaningfully prior to IPO and today are well on track to become free cash flow positive soon. We are accounted by Ind AS 116, which requires us to create non-cash accounting provisions. In the medium term, the reported Ind AS PBT and the non-gaP PBT will also converge, as our accounting provisions will start to reverse and the business profits will increase manifold. Value added services, business line, which leverages over 700 plus companies and their 150,000 employees coming to our campuses will continue to grow. However, our focus remains on our core annuity business, where we see a bigger potential to grow and increase our market share. The IPO raise where we raised INR3695 million net of offer expenses, majority is being used for expansion and growth. And today we are completely net debt negative post IPO.
Now, I will invite our Chief of Strategy and Investor Relations, Anirudh Tapuriah, to talk about the Q1 FY26 performance.
Anirudh Tapuriah — Chief of Strategy & Investor Relations
Thank you, Harsh, and a very good evening to everyone. Let me now take you through our Q1 FY26 performance. We are pleased to share that we have had a solid start to the new fiscal. Q1 has demonstrated consistent revenue growth strong operational efficiency and continued progress towards profitability despite ongoing depreciation and finance cost, which is optically higher on account of NDS accounting. We are seeing positive traction in both our core and ancillary revenue streams, and we remain focused on optimizing margins, enhancing asset utilization in terms of occupancy and scaling operations efficiently. Our revenue growth is healthy. In Q1 FY26, it stood at 3792 million, representing a 5.8% sequential growth and a 21% increase on a year-on-year basis. Our strong EBITDA and margin performance continues, supported by cost control. Our EBITDA stood at 2410 million, up 25.5% year on year with a healthy EBITDA margin of 63.6% reflecting strong operational efficiency. Our normalized EBITDA stood at 607 million growing by 109% year on year. Margin make a healthy 16% margin driven by disciplined cost management and operational efficiencies. Depreciation and finance costs stood at 1,739 million and 815 million respectively, with finance costs remaining broadly stable. Please note that these cost heads include depreciation on ROU assets and interest on lease liabilities which are non-cash in nature, depreciation on fit-outs and finance costs on borrowings stood at 374 million and 87 million respectively. Happy to share that in this quarter we have reported a positive PBT on normalized basis while it was negative 56 million as per reported India’s financials which has substantially reduced from negative 311 million in Q1 FY25 mainly due to depreciation and high interest cost burden on account of NDS 116 accounting. Our normalized PBT improved to 168 million, representing a margin of 4.4%, a significant turnaround from a negative PBT of 102 million in Q1 FY25. Our normalized OCF generation in Q1 FY26 stood at 855 million compared to 501 million in Q1 of large fiscal showing a growth of over 70%. On the supply side, since fiscal year 19, we have added 8.6 million square feet across major cities which primarily includes Pune, Bengaluru, Hyderabad, Mumbai and other cities leading to a footprint of 10.1 million square feet as of 30th June 2025. And this will further grow to 12 million square feet considering the LOIs and term sheets which we have signed. As of 30th of June 2025, 0.7 million square feet stood under fed out and 1.07 million square feet is under yet to be handed over the coming couple of quarters. Our data base continues to be less than a week. Our key demand metrics have also consistently been in line with our past performance. Let me share a few of them. Our revenue contribution from enterprise clients stood at around 90% in Q1 FY26. Our revenue from multi-city clients stood in excess of 30% in the quarter gone by. Our weighted average total tenure as of 30th June 2025 stood at 45 months with the average lock-in tenure as of the same date standing at approximately 33 months. Our occupancy in operational center is above 83% and our committed occupancy in these centers stands at around 89%. Happy to share that our committed revenue stands in excess of 40,000 million.
Now, as we have talked about our quarterly performance, I would like to hand over the call back to the moderator requesting to open the line for Q&A.
Questions and Answers:
Operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use hands-free while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Girish Chaudhuri from Aventis Pharma. Please proceed.
Girish Choudhary
Yeah, hi. Good evening and firstly, congratulations to the entire team on our successful listing and also good set of numbers. My first question, if I see the revenue rate, we have seen a 21% growth YOY and close to 6% sequential growth. If you could help us understand this breakup in terms of.
Operator
Hello Mr. Girish. Hello Mr. Girish. So, you are not audible to us.
Harsh Binani
Hello. Sorry, we lost you there in the middle.
Girish Choudhary
Yeah, yeah. So, I was. So, I’ll just again repeat my question. So, on the revenue growth of 21 yo yoy and also sequentially, we have seen 6% growth. I just wanted to understand in terms of the leased area or occupancy seats, whatever you track and. also the pricing. How should we understand this 21% growth on a YoY basis?
Harsh Binani
Sure, so we’ll take your first question. As far as the revenue contribution is concerned, we are very focused as far as our annuity revenue through lease rentals which are concerned. It stood at approximately 94% in Q1 FY26. Revenue from ancillary services contributed approximately 4.6% of the Q1 revenue of 3792 million. And when you look at fiscal year 25, the contribution from these ancillary services was approximately 3.8% only. So, our focus continues to be driving our lease rental revenue which continues to be an annuity business.
Girish Choudhary
Okay, so I wanted to understand from a leased area, why how much we have seen and also how is the pricing growth YOY?
Harsh Binani
Sure. So, from a lease area perspective, we will also cover that as well. As far as lease area is concerned, Sorry, just a second. We just come back in a while. Yeah. So, while we are just picking up the exact lease data from the quarter before and right now, I think the pricing Girish, there are 2 strategies. One is obviously the contracted revenues which escalate at about 5% year on year. So, the revenues that we are already contracted for that would automatically escalate at those numbers. And if you look at the pricing that we’ve done for the new deals that we’ve added in the last quarter. They have also been on the same average increase of 5% closer to about 7900 INR per seat. If you look at our total area, we stood at closer to about 8 million square foot of space last year and that number has already increased to about 8.7 million square foot this year with another 0.7 million square foot getting added in the next quarter which is already under construction. and a million square foot as we mentioned earlier getting added over the next 2 quarters.
Neetish Sarda
And Girish, we just like to supplement as far as our operational area is concerned, it stood at 8.3 million square feet as of June 25 and our committed occupancy on an overall basis was at 83%. It translates into approximately 160, 190 odd seats in terms of operational area. A worthwhile point will be as far as our mature footprint is concerned, it stands in excess of 165,000 seats within committed occupancy revenue in excess of 90%.
Girish Choudhary
Got it.
Neetish Sarda
So, the drivers for this is while we are adding new centers which are now getting filled, our existing centers occupancy going up, our cost reducing has helped us increase our margins. If you look at our margins, they’ve grown from a quarter 1 of last year, the quarter 1 of this year by almost 109% growing from 30 crores to almost 61 crores this quarter. First quarter of this year driven by increased occupancy and the price escalation of 5%.
Girish Choudhary
Yeah, so I also had this follow-up on the margins. We have seen, as we mentioned, a strong improvement YoY. I see operating expenses contributed a large bit to this. They have been very flattish in the range of 100-203 crores per quarter. Uninterestingly, your rental expenses has also gone up by just 10%. So, if you can explain this operating expenses bit and also the sustainable margins going ahead from let’s say the current 16% levels.
Harsh Binani
Thank you Girish. This is Harsh here. On a more strategic front, that is, The beauty of how we’ve built and scaled up our business, we see significant margin expansion on a go forward basis, not only because we are going to start to see the benefits of scale and operating leverage kicking in our business, but on a more factual basis, the base effect is also going to catch up. In the early days when our base footprint had not scaled up, new center addition used to pull down the margin. But as we are now scaling up, we are happy to inform that more than 45% of our existing portfolio is already mature. And with our current footprint of 10 million square foot, with our growth target of adding 2.5 to 3 million square foot every year, the proportion of mature centers will continue to go up. So, as a result of this, you will continue to see the margin expansion happen. and more importantly, from a margin perspective, it’s a deliberate design choice that we’ve made that as we take larger and larger campuses, our cost of operation continues to go down, which is the trend that you see reflected also on the P&L that you observed. And as we scale up, we believe in upturns or in downturns, we will continue to be the choice provider for large enterprise clients who prefer value-priced offerings such as ours. So, we expect that the margin expansion trend on our core Anity business will continue. While in future there also will be new business lines as we mentioned that will help us scale up. But for now, our focus is on the core Anity business which is where we see the highest potential to scale up the fastest. and increase our market leadership. Sure about it, Farhan, if that’s clear.
Girish Choudhary
My next question is that, like you mentioned, around 1 million square feet is coming up over the next 6 months. So, you have any pre-leasing done for this 1 million square feet? So just wanted to understand, if not pre-leasing, what’s the occupancy you’re targeting?
Harsh Binani
No, absolutely. Girish, we typically have about a 22-25% prelease that we do before any center comes in. With now the network effect kicking in, on an average taking properties north of 200 to 300,000 square foot, just 3 assets is contributing to this additional million square foot and the pipeline for all the 3 assets is very healthy. Currently the pre-permitted occupancies would be closer to about 25-30% which is in standard with most of our new centers. But we also have enough pipeline to take these projected occupancies. We typically take about 12 months to get it up to about 65-70% which is when we break even.
Girish Choudhary
Got it, got it. Thank you on all the very best.
Operator
Thank you. The next question is from the line of Shiv Kumar Rajapathy from Ambit Investment Advisers.
Shivkumar Prajapati
Yeah, hi. Am I audible? Yes, sir. Yes, first of all, a question on your topic. So, I have 2 questions. Number 1 is how we are able to maintain the lowest opex as well as capex per seat as compared to the industry average. and my second question is, would we be able to maintain the same going forward once we plan to expand in NCR, Delhi, NCR, any region? And my third question is, I believe 100% of our business comes through broker channels. So, would we be able to reduce the dependency on brokers?
Neetish Sarda
Sure, sir. Maybe I can ask, answer the first question of how we’ve been able to reduce our K-12 and higher education, and have industry standards. If you look at SmartWorks’ approach, our ability to take large individual buildings and convert them into campuses, it’s something that sets us apart. What we have realized with economies of scale and standardizing the products, 75% of the materials which are used in office spaces can actually be standardized. By doing both of this, we are able to leverage our scale, go directly to manufacturers, and significantly decrease the capex cost which is required to build out offices. Smartworks has demonstrated this multiple times across all our centers in the last 5 to 6 years where we have continuously gone ahead and kept reducing our capital expenditure, that is the upfront expenditure that we do to build out offices. We also are able to get better area efficiency because when we take up the entire building, you’re able to utilize all parts of the building. because of which our operates opex as well as the capex gets distributed over a larger area. And you know, we are able to eliminate a lot of middlemen who usually come in to run the manage the building on a day-to-day basis and are able to get those margins back to our numbers itself. So, Smartworks with its scale standardization has been able to reduce both our capex cost to 1350 and our opex cost to 34 to 36 INR per square foot. And I think this also comes with both at the macro and micro lens. On the capex side, well, we can standardize it. On the opex side, we’ve been able to reduce cost at a macro level. Just imagine Smartworks operates more than 9 million square foot of operational space today across these 9 million square foot of space. We’ve gone ahead and negotiated for EMCs centrally. We’ve gone ahead and negotiated for micro level things like tea, coffee, water centrally. With that scale, we are able to reduce cost and pass on certain benefits back to our customers. So, it’s a continuous effort to make sure that the cost to serve the customer keeps decreasing over a period of time. The second question, which is sustainability of this. Sir, we think that we’ve been able to demonstrate this across not just last year, but we’ve been able to demonstrate this across last 3 to 4 years. You’ll see continuously that our gross block with respect to the new assets which are getting added has continuously been stable and getting better. So, we think that the numbers that we are currently at, which is 1350 and 36, it is a good place to stabilize. you know, going forward. And, and also to touch on your question, as far as our brokerage expenses are concerned, we are very happy to share that in fiscal year 22, our brokerage expense was 4% of our revenue. It has already gone down to approximately 3% as our dependency on the brokerage system continues to go down. Arshiniti, if you would like to add any perspective.
Harsh Binani
Absolutely. So, 30% almost 32% in fact, in the first quarter of this year, of our revenue came from clients who have expanded with smartworks across different cities. While most of these deals, while the initial deal happens through IPCs, most of the expansion happens directly with the customer. So, we have been able to reduce our cost of acquisition also significantly in the last year. Anuradha mentioned going down from 4% to 4.5% to less than 3% now. Hopefully that answers your question.
Operator
Thank you. Before we take the next question, we would like to remind participants that you may press star and 1 to ask a question. The next question is from the line of Ayush Saboo from Choice Institutions. Please proceed.
Aayush Saboo
Yeah, hi. Could you please guide us on the seed addition that we plan to do in FY ’26 and FY ’27 and yeah just regarding that.
Neetish Sarda
No, absolutely. So, if you look at our signed up square footage already, we’ve grown from 8.3 million square foot in the start of the year to approximately 10 million square foot of space which is going to get live 0.7 of which is already under fit out. Currently our operational centers stand at about 190,000 seats. 15,000 seats are under fit outs which will get added within the next quarter itself. From there you will see an additional 26,000 seats which is the 1 million square foot which is going to come in the next 2 to 3 quarters. Both of that combined is about 40,000 seats which are going to get added this year which is already contracted for. In fact we have gone ahead and signed space even further increasing from 10 million. We have an additional 1.9 million square foot of space which translates to 43,000 seats which we’ve already contracted for which is going to come by the end of the year and the revenues for that will be realized next year. So, what I can tell you safely from 190,000 seats of operational square footage within from the signed contract as well as the under fit out deals that we have, you will see the seat count increase from 190,000 seats to 275,000 seats within the next 4 to 5 quarters.
Aayush Saboo
Okay, thank you. And just 1 more question regarding the seat addition, if we could specify the cost that we capex cost that we incur per seat and also is the total cost is the total capex cost of seat borne by Smartworks itself and also once the seats are added, how much, how many quarters does it take to start contributing to revenue?
Harsh Binani
Absolutely. So, Smartworks spends about 60,000 INR, 60,750 INR per seat to build out all of these seats. Yes, all of this is spent by Smartworks itself. We do not get our landlords to participate or share a portion of this because our cost to build out the offices is the least in the industry and we’ve been able to leverage our scale to do that., and we want to make sure that we are taking, we’re going ahead and leveraging that and spending it on our own. So, 60,000 INR is what we spent per seat. On our most strategic choice to reiterate to Neetisha’s point, doing straight leaves model is a choice that the company has made to leverage the efficiency that we are able to get both on the capex as well as opex. We mentioned earlier that our unit economics is very robust, and we are able to recover our entire capex in 32 months. So, for instance, if we are taking a building for a tenure of over 15 years with a much shorter lock-in period of about 4 to 5 years, if we are able to recover our capex in such a quick and rapid fashion, we believe we’ve built a very strong entry barrier by having an access to a building asset in the best micro markets of the country. and once the first capex cycle recovers, the building becomes a ROSI machine. As we continue to mature and age, our metrics continue to get better and the risk profile of the company continues to go down. That’s why it’s a strategic choice. And I think just to add to your second question, when will we start realizing money? So unlike typical flexible workspace, we don’t go ahead and spend that money on day 1. The 60,000 also that we are mentioning while Smartworks takes up the entire building, we only spend on the fit out of the space when a customer comes and signs the space. So, it is not like the capital gets deployed today, and we wait for a couple of quarters for the occupancy to go up. The fit out should only happen once the customer is onboarded.
Aayush Saboo
Okay, thank you. That was very helpful. shows a robust business model. Also just if you could just reiterate 1 is a 2 lakh 75 000 Target that we plan to achieve this by F5 27 n right.
Neetish Sarda
Yes. So, the total addition that you see will be for this year is about 45 000 seats which is already there in the pipeline and then additional 1.9 million square foot that we’ve signed majority of it is going to come in the next year.
Aayush Saboo
Okay. Thank you. And any guidance regarding, I know this must be a little bit far-fetched but what seat addition would be planned to do on FY ’28? Any guidance regarding that?
Harsh Binani
If you look at our performance in the last couple of years, we’ve been able to grow steady, as we earlier mentioned, at about a 30, 35% CAGR year on year. And that’s the Smartworks growth strategy that has been. I think keeping in mind the value pricing that we have and this scale that we’ve created this is something that we’ve been able to demonstrate in the past. And to reiterate to Neetish’s point made earlier, our business model allows us to take large campuses, making it very scalable. So, for us to add 2.5 to 3 million square foot on an annual basis, it is a few buildings that we need to sign every year. And given that we not only work with non-institutional developers.
Neetish Sarda
Yes, sir. So, sir, as Harsh mentioned that you will see that we’ve been able to add a significant capacity of 25 to 30,000 seats in the last couple of years and I think looking at how we are, 30 to 40, 000 is what we’ll be able to continue adding.
Aayush Saboo
Okay. Thank you. all the best for your future. Thank you.
Operator
Thank you. Participants who wish to ask a question, may please press star and 1 at this time. The next question is from the line of Srinivasan from a screen. Please proceed. Hello, Mr. Srinivasan. So, we are not able to hear you.
Sriram Srinivasan
Hello?
Operator
Yes, sir.
Sriram Srinivasan
I’m audible right now.
Operator
Yes, sir. Yeah.
Sriram Srinivasan
Yeah. Good evening, team. Congratulations on the numbers. Revenue revenue increase of 21% is a very good number. So, I just want to have 2 questions. Okay. 1 on the revenue plan. So, I just want to know what is the revenue per square feet on occupied area at Q1. and also what is the I know I understand that you have a very ambitious goal of adding 2.5 million square feet every year. I just want to know what will be the occupied occupancy ratio for the full year and also what will be the incremental or occupant incremental space being added. What will be the revenue on it also that is being signed? And also on the loan front, I just want to know what is the cost of capital for the Q1 FY 2025-26 and also what is the expected cost of borrowing for the full year?
Neetish Sarda
So thanks a lot for your question. I will probably take all the questions 1 by 1. The first question was as far as occupancy is concerned. So, we are very happy to share that in Q1 FY ’26. our occupied seats have gone up by around 5,900 odd seats. Currently it stands at approximately 158,500 odd seats. As far as your second question is concerned that how do you look at on a revenue on a per square feet basis? Again we are happy to share that on an overall basis, a revenue per square feet in Q1 FY26 that stood at approximately 173 INR on a per square feet basis. this is just on the primary leaving side. The ancillary revenue for which we did approximately 4.5% comes over and above that. As far as your next question on debt is concerned, Hashif you like to take them.
Harsh Binani
Smartworks over the last few years has been very efficiently able to work with several private international banks and PFUs and introduced a new cash flow based lease rental discounting in the industry where we are able to take advantage of long tenured enterprise tenor contracts to raise money at a very competitive rate. Today, our cost of borrowing stands at a very healthy, approximately 9-odd% and the interest expense over the last few years has been continuing to go down during the IPO, we had the opportunity to also repay some debt which will cumulatively save us about 21 crores in savings. During the course of this entire debt raise, it has also translated to us expanding our return on equity for all our shareholders. And just also wanted to add as far as our finance cost on borrowings is concerned, that stood at approximately 87 million in Q1 FY26 when you look at it as a percentage of revenue it was approximately 2.3% in Q1. So, yeah just to follow up on that what, will be the, I understand the cost of borrowing for Q1 FY26 is around 9%.
Sriram Srinivasan
Okay, I just want to know what can be the full year the cost of borrowing guidance. for Smartworks and you, and also we expect maybe a report rate, no report rate being changed down by the RBI in the coming NPC meetings. Does the company foresee this as a positive impact on the borrowing cost or because of the the turmoil in the macroeconomics to veining on the cost of borrowings for the company and also we also see that the reported change is not being passed down to the borrowers. So, what does the company foresee on this front?
Neetish Sarda
Thank you. Like we mentioned that the company has already had the chance to repay debt during IPO, which was of high cost nature. We continue to engage with the different banks and take advantage of the rate cuts. At this point of time, our rates continue to be very competitive between 9 to 10% and like we mentioned earlier, we are today net debt negative and our cross borrowings have been continuing to go down year on year and over the next 2 years we practically see this number to become very negligible.
Sriram Srinivasan
Thank you so much, that helps. All the best everyone.
Operator
Thank you. The next question is from the line of Mugan, an individual investor. Please proceed.
Unidentified Participant
Hello?
Operator
Yes, sir.
Unidentified Participant
Hello, can you hear me?
Operator
Yes, sir, you are audible. Yes, sir.
Unidentified Participant
Yes, so yeah, regarding the competitive landscape, I had a question. so there’s a competitor you have called EFC and EFC does did a 40 crores profit this year and it just manages a area of 3.5 million square feet. So, how is EFC so efficient with their managed case and how are they able to generate so much profit is my question.
Harsh Binani
So, what we can comment on is what Smartworks has done. Our revenues are annuity incomes that come in. We have been constantly increasing. if you look at our margins, they’ve grown up, gone up from in 2015, they stood at 12.5% in the first quarter of 2016 are adjusted, but that is already at 16%. This is with a significant increase in base as well as the new capacity which is added. So, Smartworks is in a stage where we’re in a high growth stage and where we have started seeing a significant increase. If you look at the last 3 years trend from 5.1% which is 36 crores in FY25 we ended the year at 172 crores which is a 12.5% EBITDA.
Now that number is further increased from 12.5% to 16%. And if you look at even our NDS losses which is what we are accounted for, even those NDS losses which are through accounting provisions which are created, they have also considerably gone down. Last year they stood at almost 63 crores in the first quarter of this year. That number has gone down to 4 crores. So, Smartworks is in the path where we are constantly increasing our margins while increasing a significant base., and we just like to draw your attention to 1 more point. If you look at our investor presentation on page 35, we have represented our normalized business performance. You will see that our normalized PBT for full year fiscal year 25 stood at 155 million. And just for the first quarter of fiscal year 26, it stands at 168 million. So, that is the robustness which you see in the underlying business.
Unidentified Participant
Okay. All right. Thank you.
Operator
Thank you. Due to time constraints, that was the last question. I now hand the conference over to Mr. Harsh Binani, Co-Founder of Smartworks for Closing Comments. Over to you, sir.
Harsh Binani
Thank you all for joining our Q1 26 Earnings Call. We appreciate your continued support and confidence in Smartworks. As we move forward, our commitment remains steadfast in delivering exceptional value, innovation, and quality to our clients while driving sustainable growth. We are excited about the opportunities ahead and look forward to sharing our progress in future updates. Feel free to reach out with any questions or for further discussions to Evy or our Investor Relations team. Thank you again. So, much for joining the call.
Operator
Thank you. On behalf of IIFL Capital Services, that concludes this conference. Thank you for joining us and you may now disconnect your line.