Cult.fit, the fitness and wellness platform backed by Temasek, Tata Digital, Accel, and Kalaari Capital, has filed its Draft Red Herring Prospectus (DRHP) for an initial public offering (IPO), but the document surfaces a cluster of operational and financial risks that prospective investors will need to evaluate carefully. The filing was made on 7 July 2025 from New Delhi.

IPO Structure and Loss Trajectory

The proposed offering comprises a fresh issue of shares worth up to ₹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.

Cult.fit has narrowed its losses significantly over three financial years — from ₹888.5 crore in FY24 to ₹480.8 crore in FY25, and further to ₹251.9 crore in FY26. Adjusted EBITDA turned positive at ₹144.8 crore in FY26, a notable inflection. However, the company itself cautioned in the DRHP that its historical financial performance may not be indicative of future growth or results — a standard but significant qualifier for a pre-profitability listing.

Auditor Observations on Data Controls

One of the more pointed disclosures in the DRHP concerns recurring observations by statutory auditors regarding data controls at Cult.fit'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.

Auditors 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 has acknowledged the dependency and said it expects to resolve the reliance on third-party systems by FY27. Notably, the observation spans three consecutive years — a pattern that may draw scrutiny from market regulators and institutional investors alike.

Geographic Concentration Risk

Cult.fit's revenue base is heavily concentrated in four metropolitan markets. Delhi-NCR, Mumbai, Bengaluru, and Hyderabad together contributed 90.44% of services revenue in FY26, up from 85.5% in FY24. The rising concentration — rather than diversification — over this period signals that the company's expansion has deepened its metro dependence rather than broadened its geographic footprint.

This exposes the business to localised disruptions, competitive pressure from regional players, and regulatory changes specific to these urban markets.

Franchise Dependence and Operational Control

The DRHP reveals that franchised and marketplace gyms accounted for 69.21% of Cult.fit's total fitness centres in FY26. The company 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. For a brand that competes on premium fitness experience, this structural gap between brand promise and ground-level delivery is a material risk.

Statutory Dues and Pending Litigation

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. Additionally, litigation involving approximately ₹55 crore is pending against the company's subsidiaries, while cases involving approximately ₹488 crore are pending against its directors, according to the litigation disclosures in the DRHP.

As Cult.fit moves toward a public listing, the resolution of these disclosures — and investor confidence in the company's path to net profitability — will shape how the market receives the offering.