Urban Company IPO GMP surges a day ahead of issue opening; should you subscribe?

Urban Company IPO to open for subscription on September 10. 

Urban Company IPO GMP has surged a day ahead of the issue opening on September 10 in the unregulated market.

According to platforms tracking the grey market activities, the shares of Urban Company are commanding a GMP of nearly 35 percent in the unofficial market. Investorgain quoted a GMP of Rs 35 for the shares of the company, indicating a listing gain of 33.98 percent.

The mobile app-based beauty and home services platform fixed a price band of Rs 98 to Rs 103 per share for its Rs 1,900 crore Initial Public Offering (IPO). At the upper end of the price band, the company's valuation is pegged at Rs 14,790 crore.

Urban Company's maiden public offering will be open for subscription during September 10-12, and the bidding for anchor investors will open for a day on September 9, the company announced.

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Urban Company IPO: Should you subscribe?

HDFC Securities in its note said, the revenue is principally generated from three streams, including platform service fees charged to consumers for service bookings, sale of tools and consumables to service professionals for service delivery and the sales of native products directly to consumer.

The analysts at the brokerage further highlighted it's competitive strengths, saying the company operates its platform at a hyperlocal level, dividing each city into multiple micro markets typically spanning a 3-5 km radius. Across all locations, Urban Company operates over 12,000 such micro markets.

"Since its inception in November 2014, UCL has completed over 97.45 million service orders in India, establishing a robust base for future growth. The Company’s scalable platform and integrated technology stack enable seamless expansion into new cities and service categories," it added.

It also highlighted key concerns:

- The Company has incurred net losses and negative operating cash flows historically. Future profitability depends on revenue growth, cost management, and successful scaling of new offerings. There is no assurance of sustained profitability.

- The business depends on providing satisfactory consumer experiences. Failure in service quality, complaint resolution, or platform functionality can hurt reputation and operations.

- The Company faces competition from traditional offline providers, niche online platforms, and new market entrants, both in India and internationally, which can impact market share, pricing, and margins.

- Rapid growth poses operational challenges such as maintaining platform quality, scaling offerings, geographic expansion, and managing resources without compromising service.

- Expansion into international markets brings currency, legal, regulatory, operational, and competitive risks.

The share allotment is expected to be finalised by September 15, and listing is scheduled for September 17 on the BSE and NSE.

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