Urban Company Limited (Subscribe)

Highlights

Urban Company Limited (UCL), incorporated on 2014, offering is a technology-driven, full-stack online services marketplace in India, which allows consumers to book a variety of home and beauty services and solutions delivered through a team of independent service professionals.

They have three business segments – (a) India consumer services – Where consumers can access services across home, beauty and wellness services. (b) Native – Where UCL sell water purifiers and electronic door locks to consumers in and outside India and (c) International business – Where consumers can access home and beauty services in UAE, Singapore and KSA through UCL marketplace.

Their 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.

They operate in 51 cities across India, UAE and Singapore, excluding cities served by joint venture in Kingdom of Saudi Arabia (KSA), of which 47 cities are in India. They primarily earn sales (i) through the platform services provided to consumers; (ii) from sale of products to service professionals for use during delivery of services through the platform; and (iii) from sale of Native products to the consumers.

Out of the total proceeds of Rs. 19,000 mn, ~Rs. 1,900 mn would go towards CAPEX for new technology development and cloud infrastructure. Rs. 750 mn would go towards lease payments of offices, Rs. 900 mn would be utilized towards marketing activities, Rs. 1,170 mn would be utilized towards general corporate purpose and ~Rs. 14,280 mn would go towards existing investors selling shareholders of the company.

Key Highlights

• The home services industry in India has a large market opportunity with a total addressable market (TAM) of approximately USD 60 bn in FY25, which is expected to grow at a CAGR of 10-11 pct, reaching USD 100 bn in FY30 driven by rising urbanization and increasingly busy lifestyles.
• UCL provides in-house training, established standard operating procedures, access to technology, tools and consumables, third party financing, insurance, and branding assistance which helps these service professionals to improve their skills, enhance quality of service delivery and increase their earning potential.
• The company use machine learning models at the micro-market level to forecast demand, allocate resources effectively, and optimize service professionals’ utilization. They believe that technological capabilities to manage the variables provide them with a competitive edge.
• UCL’s key growth strategies include (i) Grow consumer base (ii) Improve retention of existing consumer base and increasing consumer spend (iii) Launch new product and service offerings (iv) Invest in technology stack to improve consumer experience, enhance service professional efficiency and drive cost savings (v) Quicker fulfilment of services.
• Approximately 5.5-5.6 mn households used online home services in FY25 and among these around 4 mn households utilized services offered by UCL in the same period. The company face competition from other online platforms, however, many of these competitors tend to be more localized, focused on specific geographical areas or service categories.
• The NTV/Sales of the company have grown 25.5 pct/34.1 pct CAGR over FY23-25. In FY25 the company sales stood at Rs. 11,445 mn, rose 27.6 pct YoY. EBITDA of the company came at Rs. 121 mn in FY25 against loss of Rs. 1,190 mn in FY24. During FY25 the company posted profit of Rs. 2,398 mn against loss of Rs. 928 mn. However, profit includes Rs. 2,112 mn of tax credits otherwise adjusted profit would be ~Rs. 215 mn.

Key Risk

• UCL business would be adversely affected if service professionals were classified as employees, workmen or quasi-employees.
• Their business is subject to seasonality, which may result in seasonal fluctuations in operating results and cash flows.
• The company exposed to many types of operational risk, including the risk of improper, harmful or otherwise inappropriate activity and oversight errors by employees, consumers, service professionals and third parties.

Financial Performance

Valuation

Urban Company operates a technology-driven, full-stack online services marketplace for quality driven services and solutions across various home and beauty categories. Their platform enables consumers to easily order services, including cleaning, pest control, plumbing, carpentry, appliance servicing and repair, painting, skincare, hair grooming and massage therapy. These services are delivered by trained and independent service professionals at the consumers’ convenience. They are focused on enabling delivery of a quality driven, standardized and reliable service experience. At the upper end of the price band of Rs. 103, the issue is priced at an EV/TTM Sales of 12x its TTM financials. One can subscribe this issue.

Disclaimer: The views shared in blogs are based on personal opinions and do not endorse the company’s views. Investment is a subject matter of solicitation and one should consult a Financial Advisor before making any investment using the app. Making an investment using the app is the investor’s sole decision, and the company or its communication cannot be held responsible for it.