October 10, 2019 / 9:28 AM / 7 days ago

WeWork India seeks new backers after talks with local bank collapse

BENGALURU (Reuters) - WeWork’s India franchise has seen talks with existing backer ICICI Bank (ICBK.NS) on $100 million in new funding break down since The We Company’s botched stock market launch and is in discussions on raising $200 million from other investors, the venture’s chief shareholder Jitu Virwani said on Thursday.

FILE PHOTO: A man walks out of a WeWork space in the Manhattan borough of New York City, New York, U.S., October 4, 2019. REUTERS/Carlo Allegri/File Photo

Real estate mogul Virwani’s Embassy Group, backed by U.S. private equity fund Blackstone Group Inc (BX.N), set up WeWork India two years ago and had been in talks to sell the bulk of the operation to the brand’s global parent The We Company.

Virwani said those discussions had been put on hold indefinitely and that Embassy was raising around 40 billion rupees ($563.06 million) from sales of some its assets that it would invest in WeWork India if need be.

“Even if we have to put all that money ... to grow WeWork India, we will continue,” Virwani, whose son Karan heads WeWork India, told Reuters in an interview.

After one of the most dramatic collapses of a stock market flotation in recent memory, The We Company jettisoned founder and Chief Executive Officer Adam Neumann last month and is looking at financial cutbacks to help seal new investment.

Investors have expressed concerns about its burgeoning losses as well as how well a business model that involves taking long-term leases and renting out spaces for the short term will weather a global downturn.

Jitu Virwani said WeWork India, which plans to double its current capacity of 45,000 seats in six Indian cities by the end of 2020, would be profitable by the end of next year.

“Adam Neumann or no Adam Neumann, our business is here to stay,” Virwani said at a roundtable discussion with journalists.

“Yes, it (WeWork’s IPO failure) has been a bit of a challenge for us, we had a bit of a setback when we were looking to raise $100 million from ICICI. But we’ve decided to put our own money into the business (if needed),” he added.

ASIA

WeWork announced separately that it would open two new offices for co-working in Singapore and two in Manila, signs of a broadening of its base in Asia after media reports that the company was reining in plans for China.

Embassy has so far pumped roughly 14 billion rupees into the Indian WeWork business, which includes 9 billion rupees from Embassy itself, 3 billion rupees from ICICI Bank, and 2 billion rupees from other investors such as Tata Capital.

The $200 million that WeWork India is looking to raise could be entirely in equity or through a mix of debt and equity, said Karan Virwani, though he said reaching the company’s earlier valuation of around $3 billion might now be a challenge.

“Now if I go to an ICICI or any lender, somebody could give us a valuation of $800 million, somebody could say $1 billion or somebody could say $1.5 billion,” Jitu Virwani said.

Reporting by Anirban Sen; Writing by Patrick Graham; Editing by Bernard Orr and Shounak Dasgupta

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