Cult.fit IPO Explained: What The DRHP Reveals About The Company's Risks

Cult.fit, the fitness and wellness platform backed by Temasek, Tata Digital, Accel and Kalaari Capital, has filed draft papers for an initial public offering (IPO), but its Draft Red Herring Prospectus (DRHP) also outlines several operational, financial and legal risks that investors should consider before subscribing to the issue.

The proposed IPO comprises a fresh issue of shares worth up to ₹950 crore and an offer for sale (OFS) of up to 17.86 crore equity shares by existing shareholders, including Temasek's MacRitchie Investments, Tata Digital, Accel and Kalaari Capital.

Losses Narrow, But Profitability Remains Elusive

Although Cult.fit has significantly reduced its losses over the past three financial years, it is yet to achieve net profitability. The company's net loss narrowed to ₹251.9 crore in FY26 from ₹480.8 crore in FY25 and ₹888.5 crore in FY24. Adjusted EBITDA turned positive at ₹144.8 crore in FY26.

However, the company cautioned that its historical financial performance may not be indicative of future growth or operating results.

Auditors Flagged Data Control Issues

The DRHP also disclosed recurring observations by the statutory auditors regarding data controls at the company's premium fitness centres and wellness studios.

For FY24, FY25 and FY26, auditors noted that backups of books of account relating to sales at these centres were not maintained on a daily basis. They also said they were unable to verify whether audit trails in third-party point-of-sale software had been enabled throughout the year.

The company said it expects to eliminate its dependence on these third-party systems by FY27.

Heavy Dependence On Four Cities

Cult.fit remains highly dependent on four metropolitan markets. Delhi-NCR, Mumbai, Bengaluru and Hyderabad together contributed 90.44% of its fitness services revenue in FY26, up from 85.5% in FY24, indicating increasing geographic concentration.

The company also imports a significant portion of its fitness equipment from overseas suppliers, with China accounting for 38.59% of product procurement in FY26.

Franchise Model And Litigation Risks

According to the DRHP, franchised and marketplace gyms accounted for 69.21% of the company's total fitness centres in FY26.

Cult.fit acknowledged that it has limited operational and financial control over these partners, making service quality and operational consistency dependent on third parties.

The filing also disclosed delays in payment of statutory dues, including provident fund (PF), employees' state insurance (ESI), tax deducted at source (TDS) and goods and services tax (GST), during FY24-FY26.

In addition, litigation involving around ₹55 crore is pending against the company's subsidiaries, while cases involving approximately ₹488 crore are pending against its directors.

The restated financial statements also showed that businesses such as Cultsport and Cultfit Healthcare continued to post losses ranging between about ₹18 crore and ₹33 crore across FY24-FY26, indicating that profitability has not yet been achieved across all business segments.

Expert View

Imran Khan, Director at EquiRize Securities, said Cult.fit's IPO is likely to attract significant attention given India's growing fitness and wellness market.

"The company's strong brand, omnichannel strategy and growing user base provide meaningful growth opportunities. Yet, concerns over profitability, competitive intensity and valuation remain key considerations. A reasonably priced issue may attract both institutional and retail investors, while premium valuations could temper demand. The IPO's success will likely hinge on market sentiment, earnings visibility, execution of expansion plans, and the company's ability to deliver sustainable growth and long-term value creation," he said.