The WeWork India IPO, which opened with a ₹3,000-crore offer for sale (OFS), has drawn attention not just for its size but also for several governance and operational red flags. The issue, priced between ₹615–648 per share, allotted 45% to anchor investors, raising ₹1,348 crore, yet subscription from non-anchor investors remained muted during book building.

Contents

Temporary De-Pledging of Promoter Shares Audit Flags and Internal Control Weaknesses

Experts say the IPO structure—a full OFS with no fresh capital—raises questions on promoter intent and financial sustainability, since all proceeds flow to selling shareholders rather than to WeWork India itself.

Temporary De-Pledging of Promoter Shares

A key concern is the temporary release of pledged promoter shares before the listing. Over 53% of pre-IPO shares held by Embassy Buildcon LLP were pledged against borrowings of ₹2,065 crore. These pledges were revoked mainly to facilitate the IPO. If the listing had not proceeded, the shares would have to be re-pledged within 45 days.

“There aren’t many precedents of promoters revoking pledges temporarily just to enable an offer for sale,” noted Saurabh Subramanian, proxy advisory expert.

Such temporary releases can mask the true encumbrance of promoter holdings and create control risks if re-pledging resumes or debt repayment delays.

Operational Losses and Lease Commitments

Persistent operating losses further complicate the picture. Nearly 43% of FY25 revenue went to lease payouts, with profits mainly arising from deferred-tax gains. Analysts point out that lease obligations mimic debt, and using the IPO to deleverage raises concerns over the mismatch between fundamentals and promoter actions.

Also Read: Tata Capital IPO Sees Steady Response on Day 2

Audit Flags and Internal Control Weaknesses

Audit qualifications and internal control weaknesses from FY22 to FY24 remain a red flag. Issues included poor vendor documentation and a lack of related-party transparency. The Red Herring Prospectus provided little information on corrective measures.

“Persistent audit flags indicate weak board oversight, and investors will need to monitor improvements post-listing,” said Subramanian.

Promoter Litigation and Brand Dependence

Promoter-related legal risks add another layer of concern. Enforcement proceedings are ongoing under the CBI, ED, and the Prevention of Corruption Act. Investors are also exposed to brand risk, as WeWork India’s 99-year licence from WeWork Global depends on promoter control and compliance. Any adverse outcome could threaten the company’s business continuity.

Market Response and Subscription

Despite these concerns, anchor investors participated strongly, with ₹1,348 crore raised from 67 institutions, including ICICI Prudential MF, HDFC MF, Nippon MF, and Aditya Birla MF. SBI Mutual Fund notably did not participate.

However, retail and broader institutional interest were subdued. On Day 2 (October 6), the IPO saw only 13% subscription, reflecting investor caution. The IPO is scheduled to close on October 7.