Urban Company Begins Shutting Down Saudi Subsidiary as Losses Mount

According to its draft red herring prospectus (DRHP), PO-bound consumer services startup Urban Company has started to wind down its step-down subsidiary in Saudi Arabia since it was unable to turn a profit.

The startup in consumer services announced that it has begun moving its operations in Saudi Arabia to a joint venture that was established in 2024 with the goal of eventually closing the step-down subsidiary, Urban Company Arabia for Information Technology. Urban Company Arabia, which was incorporated in 2021, had a 182% increase in its pre-tax loss from INR 8.3 Cr to INR 23.4 Cr in the nine months ending December 31, 2024 (9M FY25).

For FY24, FY23, and FY22, its pre-tax loss was INR 14.1 Cr, 17.7 Cr, and 10.1 Cr, respectively. Through Urban Home Experts, the startup acquired a 100% indirect investment in Urban Company Arabia, an online marketplace that enables users to look for and hire service providers for their business and home needs.

According to the DRHP, the Group has begun operations through Waed Khadmat Al-Munzal For Marketing, a joint venture company based in the Kingdom of Saudi Arabia, as of January 1, 2025. The goal of this venture was to eventually shut down Urban Company Arabia for Information Technology, a step-down subsidiary.

Shortage of Service Professionals

Urban Company added that during FY25, FY24, FY23, and FY22, it encountered shortages of service professionals in its international markets, including the United Arab Emirates, Saudi Arabia, and Singapore, and that supply constraints might persist in the future.

"There is no assurance that we will not face any supply shortages or that we will be able to find alternatives, which could have a material adverse effect on our business, results of operations, and financial condition," the statement stated, even though the supply shortage has not yet had a negative impact on its business operations.

 Urban Company, a tech-enabled, full-stack online marketplace platform that allows consumers to hire professionals for domestic services, was founded in 2014 by Abhiraj Singh Bhal, Varun Khaitan, and Raghav Chandra. In order to raise INR 1,900 Cr through an initial public offering (IPO), it submitted its draft red herring prospectus (DRHP) to SEBI last month.

 The IPO would include an offer-for-sale component of INR 1,471 Cr and a new issue of shares valued at INR 429 Cr. In the OFS, current investor Accel India will sell shares of Urban Company for INR 433 Cr, and Bessemer India Capital Holdings II Ltd would sell shares for INR 173 Cr. Elevation Capital and VY Capital are among the other investors taking part in the OFS.

Founders will not Participate in OFS Round

Between September 2024 and February 2025, the founders of Urban Company sold shares for INR 779 Cr in secondary transactions prior to the IPO.

They are not going to take part in the OFS round. From a deficit of INR 57.8 Cr in the same period last year, the consumer services unicorn posted a profit before tax of INR 27.1 Cr in the 9M FY25.

From INR 600.9 Cr in 9M FY24 to INR 846 Cr during the period under review, operating revenue increased 41%. By doing this, Urban Company has joined a number of other cutting-edge software firms that have announced plans for massive initial public offerings.

 Additionally, startups like Physics Wallah, boAt, and Smartworks have submitted draft IPO documents to SEBI. The market's watchdog approved BlueStone and Aye Finance's initial public offerings (IPOs) last month.