WeWork India IPO Subscription Lags as Corporate Governance Issues Keep Investors Wary

WeWork India IPO has received approximately 8% subscription so far on the second day of bidding. As per BSE data, investors have bid for 20.89 lakh shares out of 2.54 crore shares on offer. The retail investor segment recorded 30% subscription by 12.51 pm today.

On the other hand the portions reserved for qualified institutional buyers (QIBs) and non-institutional investors (NIIs) saw lower update at 2% and 5%, respectively.

The ₹3,000-crore IPO opened for bidding on Friday in the price range of ₹615–648 per share. The public issue will be closed on October 7. Ahead of the IPO, the company has raised more than ₹1,348 crore from anchor investors.

The IPO is a complete offer-for-sale (OFS) of up to 4.63 crore equity shares, through which the promoter entity Embassy Buildcon LLP and investor Ariel Way Tenant Ltd (part of WeWork Global) plan to sell a portion of their holdings.

Currently, Embassy Group holds a 76.21% stake in WeWork India, while the global firm owns 23.45%.

Financial Fragility Raises Investor Concerns

The high-profile market debut is shadowed by serious financial fragility and corporate governance concerns. Proxy advisory firm InGovern Research Services, in its recent report, stated that WeWork India did not qualify for the standard Sebi eligibility requirements based on profitability (Regulation 6(1)).

It revealed that the company, instead, filed under Regulation 6(2), typically used by companies with weaker financial health. In addition, the company has a history of losses, holding a negative net worth of ₹4,374.5 million as of March 31, 2024.

Although WeWork India reported a profit after tax (PAT) of ₹128 crore for FY25, this profit was not earned through better operations but resulted solely from a significant ₹286 crore deferred tax credit. Furthermore, the company continues to face negative operating cash flow.

“Investor petitions and public records suggest that the IPO document (RHP) may not have provided complete details of these ongoing proceedings, which raises doubts about the promoters’ status as fit and proper  under Sebi norms, it said.

It is pertinent to note that the company has reportedly been sued by one of its investors for failing to disclose a criminal chargesheet filed against its promoters for serious economic offences. Investor Vinay Bansal has filed a petition in the Bombay High Court, alleging that WeWork’s Draft Red Herring Prospectus (DRHP) contains misleading statements and key non-disclosures.

Even earlier too, he had complained to Sebi, highlighting gaps in both the DRHP and the updated Red Herring Prospectus (RHP), including incorrect disclosures on brand ownership, the company’s weak financial position, and the concealment of serious criminal proceedings against its promoters.

Moreover, the advisory firm highlighted that over 53% of the promoter's shares were previously pledged against large borrowings.

“Although these shares were temporarily freed for the IPO, the promoter is contractually obligated to re-pledge them if the listing is delayed, a move that could dilute control and adversely affect share stability. Statutory auditors have also consistently flagged material weaknesses in internal financial controls between FY22 and FY24,” it added.