Urban Company IPO: Deven Choksey Recommends Subscription – A Detailed Analysis

What is Urban Company?

• Formerly known as UrbanClap, Urban Company is a technology-enabled marketplace for home and beauty/wellness services. It connects consumers with independent service professionals (plumbers, electricians, beauty therapists, etc.).
• It operates in India and also internationally in select markets (UAE, Singapore, etc.).
• Recently, Urban Company has rolled out new offerings/brands — e.g., Revamp, a home makeover / small-space quick makeover brand.
  

  Key Highlights of Urban Company’s Business Model

  Business Model

  Urban Company operates as a platform connecting service professionals with customers. It provides a wide range of services, including:

  • Beauty and Spa
  • Home Cleaning
  • Appliance Repair
  • Electrical Services
  • Plumbing
  • Painting

  The company earns revenue through commissions charged to the service professionals for each successful booking. Urban Company also invests in training and upskilling its service partners to ensure quality and customer satisfaction.

Key IPO Facts & Timeline

Feature	Details
IPO Size	₹1,900 crore total.
Fresh Issue	₹472 crore (new shares)
Offer For Sale (OFS)	₹1,428 crore (existing shareholders selling)
Price Band	₹98 to ₹103 per share.
Lot Size	Minimum 145 shares (≈ ₹14,935 at upper band).
Issue Open/Close Dates	Opens 10 September 2025; Closes 12 September 2025.
Allotment & Listing	Allotment likely 15 September; Listing on NSE & BSE expected 17 September 2025.

Financials & Performance (Last Few Years)

Metric	FY2023	FY2024	FY2025
Revenue (₹ Crores)	~636.59	~828.01	~1,144.46
Net Profit / (Loss)	–312.48	–92.77	+239.76 crores
Total Assets	~1,631.22	~1,638.64	~2,200.63 crores

• Urban Company has turned profitable in FY2025 after two years of losses. This profit jump is a critical inflection point for investors.
• Revenue growth has been strong: ~79% growth over two years (FY23 to FY25) in top-line.

Valuation & Demand

• At the upper price band of ₹103, the implied post-issue market cap is about ₹14,790 – 14,800 crore.
• Investors are expecting a listing premium: Grey Market Premium (GMP) has surged. As on Day 2 of bidding, GMP is around ₹38-39, which suggests ~38% listing gain over the upper price band, if market expectations hold.
• Subscription so far: as of Day 2, issue subscribed ~8×overall. Retail portion, Non-Institutional and employee portions are heavily oversubscribed.

Strengths & Investment Rationale

Here are what many analysts and the prospectus highlight as positives:

1. Strong growth in a large, under-penetrated market

   Home/Beauty / Wellness services are largely informal/unorganized in India. Urban Company is among the more trusted platforms. The shift toward organized / tech-mediated services is accelerating.

2. Technology + operational leverage

   Use of hyperlocal micro-market models, data-driven demand-supply matching, in-house training of service professionals, standardisation of tools and consumables. These reduce inefficiencies and improve unit economics.

3. Profitability turnaround

   Achieved net profit in FY25; asset base is growing. This is a positive signal: not just top-line growth but moving toward sustainable earnings.

4. Strong investor demand

   Anchor investors include large institutions; the IPO is heavily subscribed. GMP suggests high listing potential.

5. Diversified revenue streams & international presence

Presence beyond India helps reduce concentration risk; new service lines (such as Revamp) show attempts to innovate and expand.

Click here to explore: Dev Accelerator IPO Oversubscribed on Day 1: Retail Portion Booked 3.5x

Key Risks & What Could Go Wrong (What Investors Must Watch)

No IPO is without risk. Here are potential downsides/challenges for Urban Company:

1. Valuation appears rich
   Even with profit in FY25, valuations at ~10-13× Price/Sales multiple (or higher), and grey market expectations of >30-40% upside suggest high expectations. If earnings miss, the downside could be steep.
2. Competition & substitution
   Many service categories are highly fragmented and largely unorganized. Local players may undercut pricing or provide more personalized service. Also risk of customer bypassing the platform (direct hire of service professionals).
3. Margin pressures
   Cost of acquiring customers, marketing, service quality, training, logistics, and consumables could eat into margins. Maintaining profitability may depend heavily on scaling and operational efficiencies.
4. Dependence on offline service professionals
   The platform’s quality depends on service providers (their reliability, training, and availability). Managing this workforce, ensuring safety and consistency are non-trivial. Compliance, labour regulations (depending on jurisdiction) could add complexity.
5. Macro / regulatory risk
   Slower economic growth, inflation, consumer spending cycles, or regulatory changes (for instance, in gig economy or local licensing) could impact demand or cost base.
6. Post-IPO dilution/lock-in concerns
   Existing shareholders are selling via OFS; after IPO, the promoter’s stake drops a bit (from ~21% to ~20.4%). Anchors / big investors will have lock-in periods but OFS means some selling pressure is inherent.

What Investors Should Do: A Checklist

If you’re considering applying for the IPO, here’s a practical checklist:

• Assess your horizon: This IPO seems more suited for medium- to long-term views (2-3 years) rather than short-term speculation, given valuation and expectation of operating scale and consistent profitability.
• Decide price vs quantity: Apply possibly at the cutoff / upper price band if you believe in the business fundamentals; asking for a high number of lots increases allocation chance but also aggregate risk.
• Check allotment & lock-in: Know when shares will be credited (likely 16 Sep), when it will list (17 Sep), and lock-in periods for anchor investors (to assess potential post-listing sales).
• Compare with peers: How does Urban Company compare with other marketplaces/service platforms in India in metrics like P/S, margins, growth? Are expectations sustainable?
• Watch post-IPO performance: After listing, check whether the company keeps up with promised metrics (revenue growth, margin improvement, retention of service professionals, tech investments).

Recent Market Reaction & Sentiment

• IPO was fully subscribed within hours of opening. Retail investors in particular showed strong interest.
• By Day 2, the subscription had reached ~4.8× of the total issue. Retail, employee, and Non-Institutional Investors are heavily subscribing.
• GMP (Grey Market Premium) is high (~₹38-₹39), indicating strong listing expectations.

Valuation: Is It Overpriced or Reasonable?

• On FY25 financials: Revenue ₹1,144 crores, Profit ₹239.76 crores. Post-issue valuation at upper band gives a high multiple of Price/Sales (~10-13×) and Price/Earnings multiple depending on normalization of profit (some profit arises from deferred tax credits) etc.
• The risk is that a lot of expectation is priced in. A listing pop could occur, driven by demand, but for long-term investors the key is whether ongoing growth and margin improvement will sustain.

Is It a Good Investment?

Prospective positives:

• Strong market tailwinds: urbanization, digital adoption, consumer preference for trusted/organized services.
• Profitability now achieved; major cost/revenue levers seem to be improving.
• Good brand recognition and potential for expanding service lines.

But cautious flags:

• Valuation is lofty. If growth slows, the market may penalize.
• Sustainability of profit is to be observed (one-off tax benefits, or service quality or costs could affect margin).
• Execution risk: scaling operations, maintaining service quality, and dealing with competition.

So, for an investor who:

• Has a moderate to high risk appetite,
• Believes in the long-term growth of organized home/beauty services in India,
• Is comfortable with paying for growth (i.e., tolerating an initial high valuation),

Then yes, it may be worth subscribing. For more conservative investors, waiting to see how the company performs post-listing (first quarterly results, order growth, margin trends) might be better.

Summing Up: Should You Apply?

Depends on your risk appetite and profit expectations

• Apply if you believe in the underlying business, expect urban India / service consumer spending to grow, and are okay with a potentially volatile short-term ride.
• Be mindful of the valuation – don’t over-leverage.
• Consider your allocation strategy: retail allotments tend to be small; ensure your investment fits your portfolio strategy.
  

  Click here to explore:

  Urban Company Ipo