Urban Company IPO: Offer size, financial report card, risk factors and other takeaways

Urban Company IPO: Offer size, financial report card, risk factors and other key takeaways

After making a name for itself fixing homes, Urban Company is now looking at Dalal Street. The home services platform has filed its draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) for a Rs 1,900-crore IPO, combining a fresh fundraise with a handsome payout for early believers.

The price band and valuation metrics are still under wraps, with more details expected closer to the listing. For now, Urban Company’s draft documents offers a peek into the IPO size, financials, early investor windfalls and looming risks.

Fresh funds and sweet exits

The IPO will be a mix of fresh issue of shares worth Rs 429 crore and a Rs 1,471 crore offer for sale (OFS) by investors who are ready to ring the cash register.

Early believers such as Accel India, Bessemer India, Elevation Capital, Tiger Global, and VY Capital are lining up to book healthy exits.

Accel, one of Urban Company's earliest backers, is poised for a bumper payout. Its exit value is a staggering 16.7x higher than Tiger Global’s, 5.7x higher than VY Capital’s, and nearly double that of Bessemer India.

Elevation Capital is also set for a windfall. Its exit value is 11-fold higher than Tiger Global's and almost four-fold that of VY Capital.

The exit value is calculated by comparing the prices at which investors bought shares at. For instance, Accel’s weighted average cost of acquisition per share was Rs 3.61, making its exit value significantly higher than Tiger Global, which bought at Rs 60.25 apiece.

The IPO mandate is being managed by Kotak Mahindra Capital, Morgan Stanley India, Goldman Sachs (India) Securities, and JM Financial. Urban Company has also slotted a pre-IPO placement worth up to Rs 85.8 crore, which, if completed, will proportionately trim the size of the fresh issue without altering end-uses.

Where will the money go?

Urban Company, formerly Urban Clap, plans to deploy the fresh issue proceeds over the next three years towards platform innovation, technology upgrades, marketing, and lease payments for office expansions. Of this, Rs 190 crore is earmarked for tech and cloud infrastructure investments, aimed at boosting user and partner experience through AI-led tools and scaling backend systems.

Another Rs 70 crore will go toward new and expanded offices in India and overseas, while Rs 80 crore is set aside for an aggressive brand-building blitz across digital, outdoor, and OTT platforms. The balance will cover general corporate purposes, including working capital and strategic investments, capped at 25 percent of gross proceeds in line with SEBI norms, the DRHP says.

Expansion is also on the cards. Urban Company, already present in the UAE, Saudi Arabia, and Singapore, plans to deepen its international footprint. At present, it operates in 59 cities across four countries.

Financial scorecard

The financials paint a picture of steady ascent, albeit with a few caveats. Revenue from operations rose from Rs 437.6 crore in FY22 to Rs 637 crore in FY23 and to Rs 828 crore in FY24. Adjusted EBITDA, which was negative Rs 37.4 crore in FY22 and negative Rs 29.8 crore in FY23, turned positive with Rs 9.3 crore in the nine months ended December 31, 2024.

Urban Company reported a net profit of Rs 242.3 crore in first nine months of 2024 , a sharp reversal from the Rs 514.1 crore loss in FY22 and Rs 312.4 in FY23. However, the profit was largely driven by a deferred tax credit of Rs 215 crore.

Platform metrics are moving in the right direction. Gross Merchandise Value (GMV) grew from Rs 1,509 crore in FY22 to Rs 2,078 crore in FY23 and Rs 2,564 crore in FY24, showcasing a growth of 38 percent year-on-year (YoY) from FY22 to FY23 but slowing 23 percent in FY24. Annual transacting consumers grew almost 17 percent YoY to 5.8 million in FY24, while the number of active service professionals rose 8 percent YoY to 46,000.

Speed bumps 

Despite the growth story, Urban Company is tempering expectations.

"While we have generated net profits for the nine months ended December 31, 2024, there is no guarantee that we will be able to maintain profitability in the future," the DRHP says.

Future profitability will depend on scaling up its user and partner base, driving higher transactions and achieving operational efficiencies. Risks also loom from its reliance on a large gig worker network, making it vulnerable to regulatory shifts around the gig economy, quality control issues and partner churn.

International expansions, though promising, come with the risk of regulatory hurdles in unfamiliar markets. Add to that fierce competition from both big brands and nimble local players, and it’s clear Urban Company’s fight for a place in Indian homes is just getting started.

Another emerging concern is the steady dilution of equity resulting from extensive ESOP grants. Urban Company has ramped up its stock option issuances under its ESOP 2015 and ESOP 2022 plans, which has led to a growing share-based payment expense.

The DRHP says share-based payment expenses were at 6.9 percent of revenue in FY24 and any future grants may continue to inflate the company's non-cash expenses and increase the number of outstanding shares, thereby diluting existing shareholders​.

The company also highlighted the strain of maintaining consistency across its expanding bouquet of services and geographies. “Expansion into newer geographies and categories requires strong processes and adherence mechanisms to ensure quality is maintained at scale. If existing platforms fail to develop or ensure adherence to these processes, quality of services can be impacted, leading to poor word of mouth and impact on brand reputation — eventually leading to slower growth,” the DRHP says.

What lies ahead?

Urban Company’s public listing will be a key test of investor appetite for consumer internet businesses amid a tougher funding climate. While its growth metrics and improving margins offer reasons for optimism, questions around sustained profitability, regulatory risks, and intensifying competition will weigh heavily.

All eyes will now be on the company’s pricing, valuation, and whether it can deliver strong post-listing performance in a crowded and fast-evolving market.