Urban Company, India’s leading full stack online home services company, will hit the street this week with its ₹1,900-crore IPO. The issue consists of a fresh issue of ₹472 crore and offer for sale from non-promoters of ₹1,428 crore.
At the higher end of IPO price band of ₹103 per share, the company will be valued at a market cap of ₹14,790 crore and EV of ₹14,198 crore. Hence, it does command a steep valuation of 12 times FY25 EV/revenue. But, on the positives side, the company has made strides to reach profitability with India services business profitable at EBITDA and PAT level (₹6.9-crore PAT in Q1FY26) and topline growth from here should drive profitability faster than sales growth, as cost are unlikely to increase proportionally (see Operating Leverage). There are several levers to drive such growth, including expansion in India (already profitable), service scope in existing and future markets, and improved profitability in other segments.
The IPO is a play on four broad drivers: Rising incomes, urbanisation, digital economy and gig worker support.
Overall, while valuation is expensive, the opportunity it offers is attractive and an investment can payoff if the company delivers on profit growth from here. Long-term investors with high risk appetite can subscribe to the issue.
Business segments
The company operates three segments — India services (77 per cent of FY25 revenue), Native (10 per cent) and International (13 per cent).
India services operates the online home services platform. The company recruits, trains, oversees and provides operational support to service professionals. The 45,619 service professional, on a monthly average, served 6.54 million transacting customers in FY25. The transaction of the customer is with Urban Company, which forms the net transaction value (NTV) and on an average 33 per cent of NTV is captured by Urban Company as revenues for providing the platform. The products that the service professional use may be bought from the company, which makes 21 per cent of the India services revenues and included in the NTV. The services can be classified as Home and Beauty & Wellness. Home includes cleaning, pest control, appliance services, handyman, painting and décor, plumbing and electricians. Beauty and Wellness include skincare, hair care, grooming and massage.
The International segment operates services on similar lines in the UAE and Singapore. The company operates in Saudi Arabia as well, but under a Joint Venture. The company launched water purifiers (in FY23) and electronic door locks (in FY24) under the brand name ‘Native’. These products are seen as adjacent to core operations and launched under the company’s own brand with outsourced manufacturing but in-house design.
Growth levers
The company reported a 34 per cent revenue growth CAGR between FY23 and FY25. India services grew at CAGR of 24 per cent, driven by 17 per cent CAGR in transacting volume and a 4 per cent growth in NTV per customer. Launch of Native (450 per cent CAGR growth) and faster growth in International segments (53 per cent) boosted overall revenue growth.
In India, the company has potential to deliver growth across cities, within cities and by leveraging the service professional base. The company,present in 47 cities in India now, expects to expand to 200 cities within the next five-seven years. To enter a city, the company establishes a base of service professionals, trains them on SOPs for service, and organises a local management with centralised services infrastructure already in place.
Within each city, the digital platform allows for measuring and driving growth prospects of micro markets. A micro market is geographically a radius of 3-4 km area (for convenience) and based on services. A service may consist of sub-specialities; handyman is a service consisting of plumbers, electricians and carpenters. For instance, the RHP illustrates that in Udyog Vihar-I of Gurgaon, the company has 19 services available, while in Gopalapuram, Coimbatore, it is present in only 10 services, with the remaining services yet to be introduced in that market.
By developing markets, the runway for growth should be wide and long, firstly from 47 to 200 cities and secondly by introducing most available services in all those markets.
On the operational side, the company can drive growth from repeat customer interactions. The NTV per customer in India has grown at 4 per cent CAGR in FY23-25. While older customer cohort (five or more years on the platform) have reported low double-digit growth in NTV, the new additions will become repeat users over a period. As the customer base becomes largely mature, the NTV growth should pick pace driven by repeat transactions adding another growth lever for the company.
Operating leverage
The two largest expenses, employee (31 per cent of FY25 revenues) and Other expenses (54 per cent consisting of advertising, promotion, incentives and others) have grown slower than revenues in recent years and ceteris paribus are likely to significantly lag revenue growth from now. The technology and administrative infrastructure to power the operations are essentially in place and only needs incremental, localised additions for further growth.
While revenue growth was at 34 per cent CAGR in FY23-25, employees and other expenses grew at -4 per cent and 9 per cent CAGR. This has allowed incremental sales to largely flow down to profits with the EBITDA margin increasing from -57 per cent in FY23 to -3 per cent in FY25 and -1 per cent in Q1FY26. While India services segment reported adjusted EBITDA of ₹88 crore in FY25, Native and International segments, which are still scaling with high growth, reported EBITDA losses of ₹39 crore and ₹36 crore respectively.
Assuming 20 per cent CAGR revenue growth till FY28, flat gross margins and 5 per cent and 17 per cent CAGR in employee and other expenses growth on a conservative basis, the company should report mid-teens EBITDA margin and PAT of ₹250 crore. Under this assumption, the IPO is valued at 55 times FY28 PE.
This is not cheap by any means. However, with a long runway for growth and strong scope for profitability, the Urban Company, despite high valuations, should interest long-term, high-risk appetite investors. A lot will depend on the company executing well and delivering on profit growth over the next few years and investors must monitor this every quarter with rapt attention.
Published on September 6, 2025
