Cult.fit, the fitness and wellness company backed by leading investors such as Temasek, Tata Digital, Accel, and Kalaari Capital, has submitted its Draft Red Herring Prospectus (DRHP) for an initial public offering (IPO) that combines a fresh share issue with an offer for sale by existing shareholders. Despite narrowing losses in recent years, the company remains unprofitable, while signaling several operational and financial risks in its IPO filing.
The company reported a substantial reduction in net losses over three financial years, cutting losses to Rs 251.9 crore in the latest fiscal year from Rs 888.5 crore three years earlier. Adjusted EBITDA turned positive, reaching Rs 144.8 crore recently, yet the DRHP cautions that past financial improvements do not guarantee future results. This uncertainty is compounded by repeated auditor observations pointing to weak data control measures. Specifically, backups for bookkeeping related to sales at premium fitness and wellness centres were not maintained daily, and auditors could not verify continuous audit trails from third-party point-of-sale software used by the company. Cult.fit expects to phase out reliance on these third-party systems by the end of the upcoming fiscal year.
The filing also highlights the company’s increasing dependence on four metropolitan markets—Delhi-NCR, Mumbai, Bengaluru, and Hyderabad—which collectively accounted for over 90% of service revenue in the most recent fiscal year, a rise from 85.5% previously. This growing geographic concentration exposes the business to regional market risks. Additionally, a significant portion of its operations—nearly 70% of fitness centres—are run through franchise and marketplace partners, over which Cult.fit acknowledges limited operational and financial control. This model heightens dependency on third parties for maintaining service quality and consistency.
Additional concerns disclosed in the DRHP relate to payment delays in statutory dues, including provident fund, employees’ state insurance, tax deducted at source, and goods and services tax, spanning multiple years. Litigation also poses risks, with roughly Rs 55 crore in cases pending against subsidiaries and approximately Rs 488 crore in claims targeting company directors.