India’s urban services boom is getting a new public face. Urban Company, the company behind home cleaning, appliance repairs, beauty, and wellness services, is set to open its IPO from September 10 -12. The GMP is already surging, in anticipation. It is up 30%.
But before you rush to apply, investors should ask themselves a few key questions. Can this fast-growing platform sustain its growth? Will profitability follow? And is the hype in the grey market justified? Ahead of its bids open, let’s take a look at this upcoming IPO –
Urban Company IPO: How big is the opportunity?
Urban Company plans to raise Rs 1,900 crore through a mix of fresh equity and an offer-for-sale of 13.86 crore shares.
Urban Company IPO price band is Rs 98-103. Retail investors can apply for a minimum lot of 145 shares. This translates to nearly Rs 14,935 at the top band.
Institutions are taking the lion’s share with 75% allocation, leaving only 10% for retail investors.
With listing expected on September 17, early subscribers are keenly watching the unlisted share price of Urban Company, which shows a premium of Rs 30.50 (unofficial market). Based on this, the listing price could touch Rs 130.5, a potential gain of 30%. But it is also important to note that GMP is not the official listing price and may fluctuate based on market conditions.
Urban Company IPO: What are the risks?
In the DRHP filing, the Urban Company also noted potential pitfalls. Some of them include-
The company in its DRHP cautions, “We have incurred net losses and negative operating cash flows in the past. If we are unable to generate adequate revenue growth and increase cost-efficiency, we may not be able to generate positive operating cash flows and maintain profitability in the future, and our viability as an operating business will be adversely affected.”
It added, “If we are unable to continue to provide a satisfactory experience to our consumers, our business and reputation may be materially and adversely affected.”
Competition is also a threat. “We face intense competition across the markets we serve, which may result in reduced demand for services on our platform or reduced number of service professionals signing up for our platform, resulting in a negative impact to our revenues and costs.”
Talent is another concern. “If we are unable to attract and retain service professionals on our platform, our platform will become less appealing.”
Scaling challenges is another concern raised by the company in its risk factor section. The company noted, “Our business may suffer if we do not successfully manage our current and potential future growth, which may adversely impact our business and financial condition.”
Urban Company IPO: What’s the analyst advice?
A report by SBI Securities highlighted that they see potential for long-term investors. According to the IPO note by the brokerage house, “UCL provides a range of household services, catering to requirements of urban consumers. It has a large addressable market currently being catered to by the unorganised industry. Net Transaction Value (NTV)/Revenue for the company has grown at a CAGR of 25.5%/34.1% over FY23-25. Profitability is on an improving trend and is expected to break even at the EBITDA level in FY26E.”
“At the upper band of the issue price, UCL is valued at 12.9x P/S on post-issue capital. We recommend subscribing to the issue with a long-term investment horizon,” added the brokerage house in its IPO note.