Draft Red Herring Prospectus Overview
Cult.fit has submitted its Draft Red Herring Prospectus (DRHP) for an initial public offering (IPO), which includes a fresh issue worth up to Rs 950 crore and an offer for sale of approximately 17.86 crore shares from existing investors. Among these investors are Temasek’s MacRitchie Investments, Tata Digital, Accel, and Kalaari Capital.
Financial Losses and Future Performance
The company’s financial losses have been decreasing but have not completely disappeared. For the fiscal year 2026 (FY26), Cult.fit reported a loss of Rs 251.9 crore, down from Rs 480.8 crore in FY25 and Rs 888.5 crore in FY24. The adjusted EBITDA turned positive only in FY26, reaching Rs 144.8 crore. The DRHP explicitly warns that “our historical performance may not be indicative of our future growth or financial results.”
Concerns about Data Controls
Reports from statutory auditors have raised concerns regarding data controls at premium fitness centers. Over the past three fiscal years, auditors noted that the “backup of books of account” related to sales at luxury fitness centers and wellness studios was not maintained daily. They also reported an inability to confirm whether audit trails on third-party point-of-sale software were consistently enabled and operational. Cult.fit expects to resolve these issues by FY27.
Geographic Revenue Concentration
The business is significantly dependent on four cities: Delhi-NCR, Mumbai, Bengaluru, and Hyderabad, which accounted for 90.44% of services revenue in FY26, an increase from 85.5% in FY24. This geographic concentration raises questions about sustainability and growth.
Franchise Dependency
A substantial portion of Cult.fit’s operations is managed through franchised and marketplace gyms, which comprised 69.21% of total centers in FY26. The DRHP states that Cult.fit “exercises limited operational or financial control over our franchises and marketplace gyms,” indicating potential risks in their business model.
Delays in Statutory Payments
The DRHP mentions instances of delayed payments concerning statutory dues, including Provident Fund (PF), Employees’ State Insurance (ESI), Tax Deducted at Source (TDS), and Goods and Services Tax (GST) from FY24 to FY26. Although these delays were relatively minor, each was under Rs 25 lakh in any single fiscal year. Additional legal challenges include a Rs 36.7 crore tax dispute facing director Mukesh Bansal and minor EPF damages orders under appeal against subsidiaries Cultfit Healthcare and Cultsport.
Other Risk Factors
The DRHP outlines various other risks that must be taken into account. Significant goodwill and intangible assets on the balance sheet may be subject to impairment, a consequence of previous acquisitions such as Gold’s Gym and Fitness First. Furthermore, the prospectus reveals that the company has engaged in related party transactions, with no guarantees that these will be conducted under favorable terms in the future.
Debt Financing Risks
Cult.fit relies on debt financing for part of its capital expenditure and working capital needs, which exposes it to fluctuations in funding costs.
Business Seasonality
According to the DRHP, the business is subject to seasonal variations, and quarterly results published at the time of listing may not accurately reflect full-year performance, potentially misleading investors.
Losses at the Subsidiary Level
Individual subsidiaries, such as Cultsport and Cultfit Healthcare, recorded losses between approximately Rs 18 crore and Rs 33 crore across FY24-26, suggesting that profitability at the group level has not yet cascaded to all parts of the business.