In today’s Finshots, we break down the Urban Company IPO, which opens for subscription tomorrow (September 10th) and closes on September 12th.

But just a heads up before we dive in. This is one of those stories that’s going to be a bit longer than usual.

Before we begin, though, here’s a quick side note. Don’t buy insurance just yet. From 22nd September, GST will no longer apply to insurance premiums. That means you can save money if you wait.

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Now, onto today’s story.

The Story

I recently moved to a new home in the city from a small town. And if you’ve ever felt the bittersweet thrill of stepping into a new space, you’ll know exactly what I mean. There’s that heady rush of having a place of your own — even if it’s rented, and then the dull thud of reality that follows. Because if the house hasn’t been lived in for a while, chances are you’re walking into a dust bowl.

But instead of panicking, I just booked a full home cleaning service on the Urban Company app (formerly known as Urban Clap, but we’ll call it UC from here). Before I even entered the house, three professionals were already at my door. A few hours later, the cobwebs were gone, the house smelled fresh and I could unpack without breaking into a sweat.

Which is why, when UC announced its IPO this week, I couldn’t help but dig into its Red Herring Prospectus.

So, let’s talk about it.

It’s a ₹1,900 crore issue. Out of this, ₹1,428 crores is an offer for sale (OFS) by existing investors like Accel India, Bessemer India Capital Holdings and a few others. The remaining ₹472 crores will flow directly into UC’s kitty. They’ll use it for building new tech and cloud infrastructure, paying leases for offices, marketing and other corporate expenses.

But before you even think of putting your money into it, you probably want to know — what exactly does UC do?

Now, I don’t need to tell you because chances are you’ve used it or at least heard of it. But for the sake of formality, here’s the gist. UC is basically a platform that lets you order services like cleaning, pest control, electricians, plumbers, carpenters, appliance repairs, grooming, skincare, massages, painting, you name it. These services are delivered by trained, independent professionals right at your doorstep. Think of it as the Swiggy or Zomato of on-demand home services.

For the professionals, UC is a godsend. Earlier, they had to rely on word-of-mouth or family recommendations to find customers in their neighbourhoods. With UC, they get visibility, training and a steady stream of bookings. All they have to do is get onboarded, complete the training and start taking orders, while UC takes a cut from the overall transaction. It’s a win-win for everyone as customers get reliable service at their convenience, professionals get more work and UC takes a slice of every transaction and makes more money in the process.

So how much money does UC make, you ask?

In FY25, UC’s revenue from operations stood at ₹1,144 crores. That’s grown at a compounded annual growth rate (CAGR) of 34% since FY23. And it’s not just topline growth. The company has tapped into the classic “network effect”.

Here’s how that works. You book a cleaning service, and if it’s good, two things happen. One, you’re tempted to try other UC services. Two, you tell your friends. That word-of-mouth brings more customers to the platform. Add to this the fact that UC has smartly broken down its offerings into micro-market services — say, just cleaning a kitchen instead of the whole house, or getting your geyser checked before being sure that it needs to be serviced or repaired, and suddenly, people are using UC more often. It’s affordable, convenient and accessible.

The proof?

Repeat customers!

In FY23, 76% of UC’s users came back for more. By FY25, that figure had climbed to 82%. That kind of stickiness is gold for any platform business.

And UC isn’t resting on its core offerings. It has been experimenting and diversifying. Take InstaHelp, launched in January. It’s meant to fill in when your regular domestic help takes a day off. Professionals can show up within 15 minutes of booking to handle daily chores like cleaning, laundry, or even basic meal prep and cooking.

Then there’s Native, UC’s foray into home solutions. They’ve started selling water purifiers and electronic door locks under this brand because they think that water contamination is a rising concern thanks to pollution and climate change, and electronic locks are an emerging category as people swap keys for passcodes, fingerprints and remote unlocks.

Plus, UC isn’t just Indian anymore. It has expanded to markets like the UAE, Singapore and Saudi Arabia. In these places, house-help is expensive, sometimes legally tricky and often comes with privacy or safety concerns. So UC offers subscription-based cleaning and home services — weekly or bi-weekly visits by licensed professionals, tailored for these markets.

So far, so good.

But what’ll really make you sit up is the magic UC has pulled off with its profits.

You see, back in FY23, UC reported a net loss of ₹312 crores. But fast-forward to FY25, and suddenly it’s showing a profit of ₹240 crores. That’s a jaw-dropping turnaround, which makes you ask — how did they pull this off?

Well, three big reasons.

First, steady revenue growth, as we’ve seen. Second, cost discipline. While revenues shot up at a 34% CAGR, expenses inched up by just 9%. That’s a clear sign UC is getting smarter with costs. Take training expenses, for instance. It dropped from ₹12 crores in FY23 to ₹8 crores in FY25. Probably because as the platform matured, training became more streamlined and scalable. Think online modules instead of costly classrooms, digital upskilling instead of endless in-person sessions. All of that brought the average cost per partner down. And finally, there’s the big one — a one-time ₹211 crore deferred tax credit. This basically happens when the income recorded in the books is higher than what’s calculated under the Income Tax Act. So UC would’ve already paid more tax earlier and got a credit for it now. Strip that out, and profits still stand at about ₹28 crores. Sure, that may not sound like a blockbuster figure, but it’s still a solid turnaround as long as UC keeps growing steadily and spending wisely.

The one thing that doesn’t look all that impressive, though, is UC’s operating profit margin. It’s barely 1%. And that’s largely because its new ventures — Native products and its international operations, are still bleeding money. For now, those losses are being cushioned by profits from its bread-and-butter Indian services segment. And with no listed peer or direct competitor to compare it against, it’s tough to say whether this margin is good, bad, or just par for the course.

That said, the good bit is that competition isn’t breathing down UC’s neck just yet. Sure, there are plenty of small regional players trying to match customers with service professionals, but no one else has built a national presence quite like UC. The closest you get is Quikr’s Zimmber, but that hasn’t been too active lately. What’s more interesting, though, is that Swiggy is quietly testing the waters with its own AI-powered platform called Pyng. And if Swiggy gets serious, UC might suddenly find itself up against a rival with deep pockets, a massive customer base and the ability to scale quickly.

And that’s when things can get tricky. If UC tries to fight back by diversifying into too many segments, it risks losing sight of what made it successful in the first place — being a simple, reliable bridge between customers and professionals. We’ve seen how this story plays out when we recently wrote about EaseMyTrip, for instance. Its attempt to spread itself thin confused both customers and investors, and the stock paid the price. And UC might want to avoid walking down that path.

But even if competition feels like a problem for tomorrow, there are risks UC faces today.

The first one’s pretty straightforward — customers bypassing the platform altogether. Say you book a service through UC, and you really like the professional. Next time, instead of going through the app, you might just call them directly. For you, it’s cheaper. For the professional, it means a higher payout since they don’t have to share a cut with UC. Sure, the platform does try to clamp down on this with strict rules. But let’s be real. This isn’t unavoidable.

Then there’s the pushback from service professionals themselves. UC calls them independent contractors, not employees. But not everyone agrees. In FY24, gig worker unions across states filed complaints with labour offices, arguing that UC exercises so much control — through ratings, bookings and tiers — that it feels like an employer-employee relationship. And they want better benefits to go with it.

Look closer at the pay, and you can see why. The average hourly earning is ₹317. Sounds decent, right? But even the top 5% of professionals earn the same per hour. The only reason they take home more each month is that they bag more bookings, thanks to higher visibility on the platform. See, UC runs a tier system with Bronze, Silver and Gold tiers for professionals, where better ratings and reliability unlock more jobs. But here’s the catch. Even a tiny dip, say 0.01 in your rating, could push you down a tier, cutting your discoverability and income. No wonder some workers aren’t thrilled.

And this risk could only grow. The government is beginning to recognise the importance of gig workers in the economy, and policies around social security like provident fund contributions and mandatory licensing are slowly gaining ground. That’s fantastic for the workers, but for UC, it could mean higher costs and thinner margins.

And finally, the thing we haven’t spoken about yet is the valuation. UC’s asking price comes in at about 12x its sales. That’s broadly in line with global peers but still feels a bit steep compared to smaller domestic players (which aren’t completely comparable). But then again, UC does have something no one else in India has — a national brand, strong recall and first-mover advantage. So if you look at it from that lens, maybe that premium isn’t entirely out of place.

But if that doesn’t bother you and you’re still eyeing this IPO, just remember — there are plenty of unknowns ahead. New rivals could pop up, the market could shift and UC’s story might take a very different or even an ugly turn.

For now, it looks like an exciting bet, but what happens once the stock hits the bourses is anybody’s guess.

Until then…

Fun fact: In 2020, Urban Clap changed its name to Urban Company because it wanted to expand to international markets and felt that the name was more appealing. But honestly, that didn’t make sense to me, so I went digging. And what I found out was weird. The term ‘clap’ is also another name for gonorrhoea, a sexually transmitted disease. Not exactly the kind of association you’d want when going global, right? So the switch to Urban Company wasn’t just about being professional, it was also about avoiding awkward branding. Smart call, if you ask me.

If this story helped you understand how UC works beyond the app, don’t forget to share it with your friends, family or even strangers on WhatsApp, LinkedIn and X.

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