Urban Company shares down 45% in 6 months; why Motilal sees convenience at rich valuation

Motilal Oswal Financial Services (MOFSL) has initiated coverage on Urban Company Ltd, citing its strong position in expanding the online home services market. It operates a hyperlocal platform offering services across cleaning, repairs, beauty and maintenance, addressing inefficiencies in the traditional offline market. and the home services market in India is likely to reach around $60 billion by FY25.

Factors such as rapid urbanisation, busier lifestyles, and rising incomes are expected to drive growth in this sector. However, offline services have long faced challenges including inconsistent quality, opaque pricing, and unreliable availability, which technology-led platforms like Urban Company are addressing with standardised offerings and transparent pricing.

Shares of Urban Company rose 4.67 per cent to Rs 115.25 on Tuesday, with its market capitalization nearing Rs 17,000 crore. The stock had settled at Rs 110.10 on Monday. As of its previous close, the stock had fallen nearly 45 per cent from its post listing high at Rs 201, hit in September 2025.

MOFSL states that the online full-stack home services market was valued at approximately Rs 4,100 crore to Rs 4,300 crore in FY25 and is projected to grow at a compound annual growth rate (CAGR) of 18–22 per cent between FY25 and FY30. Despite this growth, online penetration remains below 1 per cent of the overall market, indicating significant potential for expansion.

Urban Company currently commands around 70 per cent of the online market share. MOFSL expects this to moderate to about 55 per cent as competition intensifies, while the company retains its leadership position. The report notes that habit formation in this sector may take time due to the traditionally relationship-driven nature of these services.

To recall, shares of Urban Company were listed at the bourses in September 2025 after the company raised a total of Rs 1,900 crore via IPO by selling its shares for Rs 103 apeice. However, the stock is trading nearly 7-9 per cent above its IPO price lately, after the recent correction.

Looking ahead, MOFSL forecasts India’s consumer services net transaction value (NTV) to grow at a 17 per cent CAGR from FY25 to FY37, supported by urbanisation, increasing category adoption, and gradual online penetration. It expects Urban Company’s margin to improve by approximately 840 basis points over the same period, driven by operating leverage and better market densification.

The report highlights Urban Company’s strategic adjacencies such as Native, which specialises in appliance installation and servicing. Native is expected to enhance customer retention through app-based monitoring and reliable after-sales support, contributing higher-margin growth beyond Urban Company’s core services.

MOFSL also discusses InstaHelp, Urban Company’s on-demand instant services segment. This category addresses immediate needs but remains more situational than habitual. The report mentions continued investments in supply expansion and training, which may sustain cash burn and make profitability a key factor to watch.

MOFSL has assigned a 50 times EV/Ebitda multiple to the India Consumer business, resulting in a per-share value of Rs 85. Native is valued at 3 times FY28 EV/sales with a per-share value of Rs 11, while the International business and InstaHelp are valued at 2 times and 1.5 times FY28 EV/sales respectively.

After adjusting for cash, Motilal Oswal arrives at an SoTP-based price of Rs 125 per share. Despite strong growth prospects, the report rates Urban Company as 'neutral' due to gradual habit formation, competitive risks, and investment-driven margin pressures.