The co-working space provider continues to navigate the challenging economics of its capital-intensive business model. Whilst top-line momentum remains robust, driven by aggressive space expansion and improved occupancy rates, the company's profitability trajectory remains under pressure from substantial fixed costs. The quarter marked the eighth consecutive period of losses, raising questions about the sustainability of the current growth strategy and the timeline to profitability.
Financial Performance: Growth Amidst Persistent Red Ink
Indiqube Spaces posted net sales of ₹350.14 crores in Q2 FY26, representing a sequential growth of 13.21% from Q1 FY26's ₹309.29 crores and a substantial 44.52% year-on-year expansion from ₹252.19 crores in Q2 FY25. This marks the highest quarterly revenue in the company's operating history, reflecting strong demand for flexible workspace solutions and successful space additions across key metropolitan markets.
| Metric | Q2 FY26 | Q1 FY26 | Q2 FY25 | QoQ Change | YoY Change |
|---|---|---|---|---|---|
| Net Sales | ₹350.14 Cr | ₹309.29 Cr | ₹252.19 Cr | +13.21% | +44.52% |
| Operating Profit (Excl OI) | ₹207.89 Cr | ₹188.11 Cr | ₹144.78 Cr | +10.51% | +43.59% |
| Operating Margin % | 59.37% | 60.82% | 57.41% | -145 bps | +196 bps |
| Interest Cost | ₹106.79 Cr | ₹109.93 Cr | ₹78.77 Cr | -2.86% | +35.55% |
| Depreciation | ₹156.23 Cr | ₹142.98 Cr | ₹121.67 Cr | +9.26% | +28.41% |
| Net Loss | ₹29.87 Cr | ₹36.76 Cr | ₹52.52 Cr | -18.75% | -43.13% |
Operating profit excluding other income reached ₹207.89 crores in Q2 FY26, up 10.51% sequentially and 43.59% year-on-year, demonstrating operational leverage as the company scales. However, operating margins contracted 145 basis points quarter-on-quarter to 59.37% from 60.82% in Q1 FY26, primarily due to higher employee costs which rose to ₹24.90 crores from ₹19.97 crores. On a year-on-year basis, margins expanded 196 basis points from 57.41%, reflecting improved pricing power and occupancy optimisation.
The critical challenge remains below the operating profit line. Interest costs of ₹106.79 crores, whilst marginally lower sequentially, remain elevated at 30.50% of revenues, reflecting the debt-heavy capital structure required to fund property acquisitions and fit-outs. Depreciation charges of ₹156.23 crores—representing 44.62% of revenues—continue to burden the profit and loss account as the company amortises substantial capital investments in interior infrastructure and technology systems.
Operational Challenges: The Path to Profitability Remains Unclear
Whilst Indiqube Spaces demonstrates strong operational performance at the EBITDA level, the company's path to sustainable profitability remains uncertain. The latest ROCE of 41.44% indicates improving capital efficiency, yet this metric masks the fundamental challenge: the company continues to burn cash at the net profit level despite generating positive operating cash flows.
For the full year FY25, Indiqube reported operating cash flows of ₹611.00 crores—the highest in its operating history—demonstrating that the core business generates substantial cash. However, investing activities consumed ₹258.00 crores whilst financing activities resulted in an outflow of ₹337.00 crores, primarily for debt servicing. This cash flow dynamic highlights the capital-intensive nature of the business model, where expansion requires continuous investment whilst legacy debt obligations constrain financial flexibility.
Critical Concern: Negative Book Value
The company's shareholder funds stood at negative ₹3.11 crores as of March 2025, resulting in a book value per share of negative ₹0.79. This alarming metric reflects accumulated losses of ₹139.00 crores in FY25 alone, bringing reserves and surplus to negative ₹45.82 crores despite share capital of ₹20.19 crores. The negative book value raises serious questions about financial stability and the company's ability to withstand any operational setbacks.
The balance sheet reveals a company stretched thin. Long-term debt stood at ₹222.47 crores as of March 2025, more than doubling from ₹100.14 crores in March 2024. Current liabilities surged to ₹807.62 crores from ₹621.22 crores, with other current liabilities accounting for ₹629.38 crores—likely comprising advance rentals, security deposits, and deferred revenues. Fixed assets grew to ₹655.28 crores from ₹497.27 crores, reflecting continued capital deployment in new centres and refurbishments.
The debt-to-EBITDA ratio shows "Negative Net Debt" classification, which appears misleading given the substantial interest burden. This classification likely stems from the accounting treatment of advance rentals and customer deposits as liabilities rather than traditional debt, even though these obligations create similar cash flow pressures. The net debt to equity ratio of negative 13.18 reflects the negative equity base rather than a position of financial strength.
Industry Context: Consolidation Pressures Mount in Co-Working Sector
The flexible workspace industry in India has witnessed significant consolidation over the past two years, with several smaller players exiting or being acquired as the economics of the business model prove challenging. Indiqube operates in an intensely competitive landscape where pricing power remains limited, customer acquisition costs are high, and the capital requirements for expansion are substantial.
The company's 5-year sales CAGR of 27.50% demonstrates strong demand tailwinds, yet this growth has come at the cost of mounting losses. The 5-year EBIT growth of 178.00% indicates improving operational efficiency, but the absolute EBIT levels remain insufficient to cover the heavy depreciation and interest burden inherent in the business model.
Market Position: Sixth Largest by Market Cap
With a market capitalisation of ₹4,255 crores, Indiqube ranks sixth amongst diversified commercial services peers. However, this valuation appears disconnected from fundamental performance, with the company trading at a price-to-book value of negative 166.32x due to its negative book value. The valuation grade of "RISKY" accurately reflects the speculative nature of the investment proposition at current levels.
Peer Comparison: Valuation Disconnect Evident
Comparing Indiqube Spaces to its co-working peers reveals significant valuation anomalies and operational disparities. The company's inability to generate profits stands in stark contrast to more established players, whilst its valuation metrics defy conventional financial analysis due to negative book value.
| Company | P/E (TTM) | P/BV | Debt/Equity | Div Yield |
|---|---|---|---|---|
| Indiqube Spaces | NA (Loss Making) | -166.32x | -13.18 | NA |
| Wework India | 64.76x | 42.05x | 0.00 | NA |
| Smartworks Coworking | NA (Loss Making) | 58.42x | 2.99 | NA |
| CMS Info Systems | 16.15x | 0.25x | -0.15 | 1.76% |
| SIS | 88.94x | 0.19x | -0.10 | NA |
The peer comparison highlights Indiqube's precarious financial position. Whilst Wework India trades at 64.76x earnings with a positive book value of 42.05x, Indiqube's negative book value renders traditional valuation metrics meaningless. The company's negative 166.32x price-to-book ratio essentially means investors are paying ₹203 per share for a company with negative ₹0.79 of book value per share—a clear indication of speculative positioning rather than fundamental value.
Valuation Analysis: Speculative Premium Unjustified by Fundamentals
Indiqube Spaces trades at valuation multiples that defy conventional financial analysis. With an EV/EBITDA of 7.46x and EV/Sales of 4.34x, the company commands premium valuations typically reserved for profitable, high-growth businesses. However, these multiples mask the fundamental reality: the company has never generated a profit and shows limited near-term prospects of doing so.
The enterprise value to EBIT ratio of 35.55x appears elevated, though this metric has limited utility given the company's persistent losses at the net profit level. More concerning is the enterprise value to capital employed ratio of 14.73x, which suggests investors are paying nearly 15 times the capital invested in the business for a company generating negative returns to shareholders.
The stock's 52-week range of ₹195.30 to ₹243.80 indicates significant volatility, with the current price of ₹203.00 sitting just 3.94% above the year's low. This proximity to support levels suggests investor confidence remains fragile, with the stock having declined 16.74% from its 52-week high reached earlier this year.
Shareholding Pattern: Stable Base Despite Operational Struggles
The shareholding pattern reveals a concentrated ownership structure with promoters holding a commanding 60.60% stake as of July 2025, unchanged from the previous quarter. This substantial promoter holding provides strategic stability but also limits free float liquidity, with only 39.40% of shares available for trading.
| Category | Jul'25 | Jun'25 | QoQ Change |
|---|---|---|---|
| Promoter Holding | 60.60% | 60.60% | 0.00% |
| FII Holding | 22.88% | 22.88% | 0.00% |
| Mutual Fund | 5.16% | 5.16% | 0.00% |
| Insurance | 0.43% | 0.43% | 0.00% |
| Other DII | 6.45% | 6.45% | 0.00% |
| Non-Institutional | 4.48% | 4.48% | 0.00% |
Foreign institutional investors hold 22.88% of the equity, representing significant international interest in the Indian co-working story. Mutual funds account for 5.16% whilst other domestic institutional investors hold 6.45%, bringing total institutional holdings to 34.92%. The stability in shareholding—with zero changes quarter-on-quarter across all categories—suggests investors are maintaining their positions despite operational challenges, possibly betting on long-term industry consolidation and eventual profitability.
Notably, there is no promoter pledging, which eliminates one potential risk factor. The promoter group includes Anshuman Das (22.02%), Rishi Das (16.00%), and Meghna Agarwal (15.99%), alongside corporate entities Careernet Technologies Private Limited (4.51%) and Hirepro Consulting Private Limited (1.88%).
Stock Performance: Underperformance Reflects Fundamental Concerns
Indiqube Spaces has significantly underperformed broader market indices across all measurable timeframes. The stock declined 1.24% in the latest trading session to ₹203.00, compared to the Sensex's modest 0.11% decline, generating negative alpha of 1.13%.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Day | -1.24% | -0.11% | -1.13% |
| 1 Week | -4.81% | -0.86% | -3.95% |
| 1 Month | -12.65% | +1.57% | -14.22% |
| 3 Month | +1.25% | +3.22% | -1.97% |
The one-month performance is particularly concerning, with the stock declining 12.65% whilst the Sensex gained 1.57%, resulting in negative alpha of 14.22%. Over the past week, the stock fell 4.81% compared to the Sensex's 0.86% decline, generating negative alpha of 3.95%. Even the three-month period, which shows a marginal 1.25% gain, underperformed the Sensex's 3.22% advance by nearly 200 basis points.
Technical indicators paint a bearish picture. The stock trades below all key moving averages, sitting at ₹203.00 against the 5-day moving average of ₹209.52, 20-day average of ₹220.12, and 50-day average of ₹225.65. This consistent positioning below short-term and medium-term averages indicates sustained selling pressure and lack of buying interest.
"The disconnect between robust revenue growth and persistent losses highlights the fundamental challenge of the co-working business model: operational leverage exists, but the capital structure burden remains insurmountable."
Investment Thesis: High Risk, Uncertain Reward
The investment case for Indiqube Spaces rests entirely on a speculative thesis: that the company will eventually achieve profitability as it scales operations, that industry consolidation will benefit larger players, and that the flexible workspace market in India will continue expanding rapidly. However, each of these assumptions carries substantial execution risk.
The proprietary Mojo score of 24 out of 100 places the stock firmly in "STRONG SELL" territory, reflecting the confluence of negative factors: loss-making operations, negative book value, elevated valuation multiples, and deteriorating price momentum. The quality grade of "BELOW AVERAGE" acknowledges the company's operational challenges despite positive financial trends in recent quarters.
Key Strengths & Risk Factors
KEY STRENGTHS ✓
- Robust Revenue Growth: 44.52% YoY expansion in Q2 FY26 demonstrates strong demand for flexible workspace solutions
- Improving Operational Efficiency: Operating margins of 59.37% indicate strong pricing power and cost management at the EBITDA level
- Positive Operating Cash Flow: Generated ₹611.00 crores in FY25, highest in company history, proving core business viability
- High Institutional Holding: 34.92% institutional ownership provides credibility and potential price support
- No Promoter Pledging: Zero pledged shares eliminates one key risk factor
- Narrowing Losses: Net loss improved 43.13% YoY, showing trajectory towards potential profitability
- Latest ROCE of 41.44%: Demonstrates improving capital efficiency as scale increases
KEY CONCERNS ⚠
- Persistent Losses: Eighth consecutive quarter of losses with no clear path to profitability visible
- Negative Book Value: Shareholder funds at negative ₹3.11 crores raises serious solvency concerns
- Heavy Interest Burden: Interest costs at 30.50% of revenues severely constrains profitability potential
- High Depreciation: Depreciation at 44.62% of revenues reflects capital-intensive business model
- Elevated Debt Levels: Long-term debt more than doubled to ₹222.47 crores in one year
- Negative Price Momentum: Stock down 12.65% in one month, trading below all moving averages
- Valuation Disconnect: Premium multiples unjustified by loss-making operations and negative book value
Outlook: What to Watch
POSITIVE CATALYSTS
- Achievement of quarterly profitability would dramatically change investment narrative
- Continued margin expansion above 60% would demonstrate pricing power sustainability
- Debt reduction or refinancing at lower rates could improve interest coverage substantially
- Industry consolidation creating opportunities for market share gains and pricing improvement
- Successful capital raise to strengthen balance sheet and fund growth without additional debt
RED FLAGS
- Further deterioration in book value or inability to arrest loss trajectory
- Margin compression below 55% would indicate pricing pressure intensifying
- Additional debt raising to fund operations rather than growth would signal distress
- Occupancy rate declines or customer churn acceleration indicating demand weakness
- Stock breaking below ₹195 (52-week low) would signal severe confidence erosion
The Verdict: Avoid Until Path to Profitability Becomes Clear
Score: 24/100
For Fresh Investors: Avoid initiating positions. The combination of persistent losses, negative book value, heavy debt burden, and premium valuation creates an unfavourable risk-reward profile. Wait for concrete evidence of sustainable profitability before considering investment.
For Existing Holders: Consider reducing exposure on any price strength. Whilst revenue growth remains robust, the path to profitability remains uncertain and the balance sheet deterioration poses material risks. The 43.13% improvement in losses year-on-year is encouraging but insufficient to justify current valuations given the negative book value and continued cash burn at the net profit level.
Rationale: Despite strong operational metrics and improving trends, fundamental concerns around profitability, balance sheet strength, and valuation disconnect outweigh growth positives. The speculative nature of the investment proposition makes this unsuitable for conservative investors.
Note- ROCE= (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions.
