Cult.fit IPO: From audit flags to city concentration, DRHP highlights key risks for investors

New Delhi, July 7 (IANS) Cult.fit, the fitness and wellness platform backed by prominent investors including Temasek, Tata Digital, Accel and Kalaari Capital, has filed its Draft Red Herring Prospectus (DRHP) for an initial public offering (IPO), but the filing also lays out several business and operational risks that prospective investors will need to weigh.

The proposed IPO comprises a fresh issue of shares worth up to Rs 950 crore and an offer for sale (OFS) of up to 17.86 crore equity shares by existing shareholders, including Temasek’s MacRitchie Investments, Tata Digital, Accel and Kalaari Capital.

While the company has significantly reduced its losses over the past three financial years, it has yet to achieve net profitability. Its loss narrowed to Rs 251.9 crore in FY26 from Rs 480.8 crore in FY25 and Rs 888.5 crore in FY24. Although adjusted EBITDA turned positive at Rs 144.8 crore in FY26, the company cautioned in the DRHP that its historical financial performance may not be indicative of future growth or results.

The filing also highlights recurring observations by the statutory auditors regarding data controls at the company’s premium fitness centres and wellness studios.

For FY24, FY25 and FY26, auditors noted that backups of books of account relating to sales at these centres were not maintained on a daily basis. They also said they were unable to verify whether audit trails in third-party point-of-sale software had been enabled and operated throughout the year. Cult.fit said it expects this dependency on third-party systems to end by FY27.

Another key risk is the company’s heavy dependence on four metropolitan markets. Delhi-NCR, Mumbai, Bengaluru and Hyderabad together contributed 90.44 per cent of services revenue in FY26, up from 85.5 per cent in FY24, indicating increasing geographic concentration.

The DRHP further shows that franchised and marketplace gyms accounted for 69.21 per cent of the company’s total fitness centres in FY26. Cult.fit acknowledged that it exercises limited operational and financial control over these franchise and marketplace partners, making service quality and operational consistency dependent on third parties.

The filing also disclosed delays in payment of statutory dues, including provident fund (PF), employees’ state insurance (ESI), tax deducted at source (TDS) and goods and services tax (GST), across FY24 to FY26. In addition, litigation involving around Rs 55 crore is pending against the company’s subsidiaries, while cases involving approximately Rs 488 crore are pending against its directors, according to the litigation disclosures in the DRHP.

–IANS

pk