Urban Co. IPO review

•    The company is the only organized player in the segment of technology driven online services market place.
•    It enjoys most preferred service provider in 51 cities across India, UAE, and Singapore.
•    The company posted growth in its top lines and has turned the corner from FY24.
•    Based on its recent financial data, the IPO appears aggressively priced.
•    Well-informed/cash surplus/risk seekers may park funds for long term.

ABOUT COMPANY:
Urban Co. Ltd. (UCL) operates a technology-driven, full-stack online services marketplace for quality driven services and solutions across various home and beauty categories. It operates in 51 cities across India, United Arab Emirates (“UAE”) and Singapore, excluding cities served by its joint venture in Kingdom of Saudi Arabia (“KSA”), of which 47 cities are in India, as at June 30, 2025. UCL’s platform enables consumers to easily order services, including cleaning, pest control, electrician, plumbing, carpentry, appliance servicing and repair, on demand home-help assistance, painting, skincare, hair grooming and massage therapy. These services are delivered by trained and independent service professionals at the consumers’ convenience. 

In Fiscals 2023 and 2024, it expanded into home solutions with the launch of water purifiers and electronic door locks, respectively, under the brand name ‘Native’. The company also recently launched, and is in the process of scaling up, it’s on demand home-help assistance (“InstaHelp”) offering in specific micro markets across a number of cities in India. It is focused on enabling delivery of a quality driven, standardized and reliable service experience. To achieve this, it has engaged a select network of background verified independent service professionals, empowering them with comprehensive support. This includes detailed in-house training, established standard operating procedures, access to technology, tools and consumables, third party financing, insurance, and branding assistance. This approach enables the service professionals to improve their skills, enhance quality of service delivery and increase their earning potential.

As per the Redseer Report, the home services industry in India has a large market opportunity with a total addressable market (“TAM”) of approximately US$60 billion in Fiscal 2025, which is expected to grow at a compounded annual growth rate (“CAGR”) of 10-11%, reaching US$100 billion in Fiscal 2030 driven by rising urbanization and increasingly busy lifestyles; whereas the home services industry in India is largely unorganized, fragmented, and offline, with online penetration of less than 1.0%, as of Fiscal 2025 based on net transaction value. As per the Redseer Report, consumers face the twin challenges of poor access to quality supply and inconsistent service quality while service professionals suffer from a lack of predictability of demand for their services and often rely on intermediaries, thereby resulting in sub-optimal earnings. It operates business under three business segments which are (a) India consumer services; (b) Native; and (c) International business.

In three months ended June 30, 2025, it had 54,347 average monthly active service professionals on its platform, i.e., a service professional who has delivered at least one service during a given month. This figure is calculated by averaging the number of such professionals across all months in a specified period / year. UCL empower service professionals with in-house training and access to tools and consumables, and thus the company has helped them improve their earning potential while enabling them to maintain flexibility in their daily schedule. As per the Redseer Report, the service professionals associated with it, on average, earn 30-40% more than their peers who are not associated with any platform in Fiscal 2025. As of June 30, 2025, it had 1435 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden/combo book building route IPO of equity shares issue worth Rs. 1900.00 cr. (approx. 184466020 shares at the upper cap). The IPO consists of fresh equity issue worth Rs. 472 cr.  (approx. 45825243 shares at the upper cap), and an Offer for Sale (OFS) worth Rs. 1428.00 cr. (approx. 138640777 equity shares at the upper cap). The company has announced a price band of Rs. 98– Rs. 103 per equity shares of Re. 1 each. The issue opens for subscription on September 10, 2025, and will close on September 12, 2025. The minimum application to be made is for 145 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 12.85% of the post-IPO paid-up equity capital. From the net proceeds of the fresh equity issue, the company will utilize Rs. 190.00 cr. for expenditure on new technology development and cloud infra, Rs. 75.00 cr. for lease payments for offices, Rs. 90.00 cr. for marketing expenses, and the rest for general corporate purposes. 

The company has reserved equity shares worth Rs. 2.50 cr. for its eligible employees and offering them a discount of Rs. 9.00 per share. From the rest, it has allocated not less than 75% for QIBs, not more than 15% for HNIs, and not more than 10% for Retail investors.

The joint Book Running Lead Managers (BRLMs) to this issue are Kotak Mahindra Capital Co. Ltd., Morgan Stanley India Co. Pvt. Ltd., Goldman Sachs (India) Securities Pvt. Ltd., and JM Financial Ltd., while MUFG Intime India Pvt. Ltd., is the registrar to the issue. Kotak Securities Ltd., and JM Financial Services Ltd. are the syndicate members.

Having issued initial equity shares at par, the company issued further equity shares in the price range of Rs. 94.67 – Rs. 354000 per share (based on Re. 1 FV), between March 2015 and August 2025. It has also issued bonus shares in the ratio of 2499 for 1 in February 2025. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. XX, Rs. XX, Rs. XX, and Rs. XX per share. 

Post-IPO, its current paid-up equity capital of Rs. 139.01 cr. will stand enhanced to Rs. 143.59 cr. Based on the upper cap of the IPO price band, the company is looking for a market cap of Rs. 14789.55 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total income/net profit/ - (loss), of Rs. 726.24 cr. / Rs. – (312.48) cr. (FY23), Rs. 927.99 cr. / Rs. – (92.77) cr. (FY24), and Rs. 1260.68 cr. / Rs. 239.77 cr. (FY25). For Q1 of FY26 ended on June 30, 2025, it earned a net profit of Rs. 6.94 cr. on a total income of Rs. 398.49 cr. For FY25, net profit has the component of deferred tax of Rs. 211.21 cr.).

For the last three fiscals, the company has posted an average EPS of Rs. 0.24 and an average RoNW of 0.40%. The issue is priced at a P/BV of 8.25 based on its NAV of Rs. 12.48 as of June 30, 2025, and at a P/BV of 6.43 based on its post-IPO NAV of Rs. 16.03 per share (at the upper cap). 

If we attribute FY26 annualized earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 2060.00. Based on FY25 earnings, the P/E stands at 61.68. Thus, the issue is aggressively priced. 

The company has not provided its PAT margins and RoCE margins data in the offer documents.

DIVIDEND POLICY:
The company has not paid any dividends for the reported periods of the offer document. It has already adopted a dividend policy in January 2025, based on its financial performance and future prospects.

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has no listed peers to compare with. 

MERCHANT BANKER’S TRACK RECORD:
The four BRLMs associated with the offer have handled 73 pubic issues in the past three fiscals, out of which 18 issues closed below the offer price on the listing date.