In 2021, Prosus, among the world’s biggest tech investors, led a $188-million funding round in Urban Company, doubling its valuation to $2 billion—on the promise of bringing order to the chaotic home services market in the country. Four years later, that bet seems to have been delivered.
The home services platform’s Rs 1,900-crore IPO last week drew overwhelming demand, getting fully subscribed in under three hours and closing with subscriptions over 104 times—among the strongest issues by a new-age Indian tech firm. As of the third and final day of the issue, stock market investors had subscribed 103.63 times to Urban Company’s IPO.
“Home services is a very, very large market. It is highly fragmented in the country with a very low level of digital penetration. While I think from a product’s perspective ecommerce has seen its fair bit of internet adoption, services were something that was still very under-penetrated. We saw potential or an opportunity for a tech-led company to create a large outcome,” Gaurav Kothari, Principal at Dutch investment company Prosus Ventures, tells YourStory.
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Urban Company was founded in 2014 by Abhiraj Singh Bhal, Varun Khaitan, and Raghav Chandra with a tech-driven marketplace model, offering a range of at-home services.
While home services continues to be a major driver of Urban Company’s growth, it has also expanded its offerings over the years to launch its own line of products under the ‘Native’ brand. This includes smart water purifiers and door locks. Most recently, the company began piloting the micro home makeover sub-brand ‘Revamp’.
Each service rolled out by Urban Company is backed by a strong strategy, notes Kothari. “It’s not that they’re just picking and choosing anything that can drive through. There’s a very strong thought process that goes behind before launching something like an install or a product business. Everything has to be tied together.”
The firm’s strategy seems to have clicked.
In FY25, Urban Company saw its revenue grow more than a third to Rs 1,144.5 crore from Rs 828 crore in the previous year. The company’s profitability also improved, although the main driver was a large tax credit of Rs 211 crore. Urban Company reported a net profit for the first time of Rs 239.8 crore against a net loss of Rs 92.7 crore in the previous year.
On how Prosus foresaw the firm’s path to profitability, Kothari says, “The unit economics were very, very attractive and (so were) the contribution margins that they could operate at. At the time of investment, they were unprofitable, but we could clearly see that as the business scales, there is strong operating leverage, be it on the corporate cost side or be it on the advertising side. We knew this would translate into profitability in the future, and it has.”
Contribution margin is a financial metric that represents the revenue a company has left over after subtracting its variable costs.
Urban Company is set to debut on Indian stock exchanges on Wednesday, September 17, and early signals point to a strong listing.
In the unofficial grey market, the company’s shares were trading last week at a premium of about Rs 44 over the issue price. The grey market premium, closely tracked ahead of IPOs, reflects the difference between the IPO price and the price at which shares change hands informally before listing, offering an early gauge of investor demand.
Edited by Swetha Kannan
