Urban Company is easily the best VC funded company to have come out of India. Here's why

Urban Company is easily the best VC funded company to have come out of the Indian Startup Ecosystem. And it's proved it once again, this time with its IPO filing. It's definition of "grace" and "class".

In FY25, UC did an operating revenue of ₹1,144 Cr. And then there was also an income of ₹117 Cr from interest and sales of mutual funds. The company turned profitable, with its core services having a gross margin of 15%, netting ₹113 Cr. Its products sold well, too. To both its professionals (₹188 Cr), and customers ('Native' water purifiers had a revenue of ₹116 Cr). Then there were memberships as well, which fetched ₹98 Cr.

Very interestingly, the company could grow 38% YoY, keeping its employee and promotion costs UNCHANGED. Which is incredible, to say the least.

Despite these realities, and the fact that UC was last valued at $2.1B, when it raised $255M back in June 2021, it has still valued itself at $1.7B as it's going public.

Think about it. The company has had an ESOP liquidity program at a valuation of $2.8B in Dec 2021. Employees had a party. Despite that, when it came to the retail market, it chose to value itself lesser than that. Even though the company has only grown from strength to strength in the last four years.

You know what that's called? It's called "keeping money on the table". It's called having a special kind of respect for retail investors, and "taking them along" for the next phase. This kind of "class" is basically unheard of.

Some people might say, "But Nishant! A revenue multiple of ~13 isn't that modest. Especially for a services operation!". Well, they're mistaken.

Think about this: UC doesn't a competitor in India. Forget about India, there's no comparable for UC in THE WHOLE WORLD. No company has been able to do what UC has achieved, at this scale, with this profitability profile. Anywhere.

It's true. You could look it up. Basically, there is no basis to refute the 13x revenue multiple. In fact, in my opinion, it could even be more. Think about its consumer brands business. Every company in this domain is dependent on a foreign platform for sales. Not UC. They have their own network. In fact, their own "sales force", too (if you know what I mean). Is that "priced in" in its current valuation multiple? I don't think so.

"But Nishant! Aren't their new age companies like UC which are being funded these days?".

Sure. But those experiments will end in tears. Why? Because what UC has achieved is a result of "pure grit", more than anything else. And "pure grit", for all practical purposes - is not a replicable business strategy.

Let me write that again: “Pure grit”, for all practical purposes - is not a replicable business strategy.

This is the reason why there's only one Sarvanna Bhavan. One Ferns n Petals. And one UC.

This business is EXTRAORDINARILY hard. And even that is an understatement of the century. On-demand aggregation of services is infinitely harder than aggregation of anything else. Think about cabs. How many moving parts does Cab aggregation have? There's the driver, the quality of his car, his basic conduct (which is to say, he needs to be mostly quiet)... and that's it. But even with those limited moving parts, how did Cabs fare in India as far as quality of ops is concerned?

Such is the inherent hardness of running an ops heavy business in India, that long after BluSmart's implosion, nobody can even name a close second as far as basic quality of service is considered. And that's when the Cab Aggregation business has burnt over ₹35,000 Cr in all these years.

Now multiply that difficulty level by 100, and then you'll have what UC deals with every day. It's a firestorm of operational nightmares which would scare someone even when they're awake. But somehow UC manages to shine through, all day, every day.

And this is not just my perception. For a long time, UC didn't have any major competitor at all. After Housejoy imploded (due to complicated reasons beyond the scope of this article), there was nobody who could take on this space. And it's not like nobody wanted to. Many tried, including major players like Flipkart. But it just didn't work.

Why? It's because people are intrinsically unpredictable and unreliable. And when it comes to those "qualities", Indians are in a different league altogether. When it comes to work ethics, we're not exactly like Japanese (or even Chinese), we're more like Nigerians. Maybe it's because we're so densely populated (490 persons/Sq Km, as compared to 150 even in China) that we just can't afford to think about other people. But whatever it is, running an ops heavy business in this environment requires brass balls.

But UC did it. At scale. And with such dignity and grace, extended even to the retail investors who are most liberally screwed at the first chance by everyone. Hats off! The company could have gone for a $2.5 valuation, and it would have been taken up. No doubts about it. Still, it went modest and safeguarded the Average Aakash? That’s extraordinary! The company has helped EVERYONE along the way; its employees, its partners, its customers, its vendors. It literally pioneered the concept of “dignity of labour” in this market. It always played fair. And it could still make money. Wow!

I wish them all the luck in the world and more. May they make, what Sanjeev Bikhchandani Sir called - a last institution. India would greatly benefit from it.

That said, since I’ve praised the company so much, I should also mention the risks I think are very prominent.

UC’s greatest risk is that the founding team is “irreplaceable” for the company’s future. There’s simply nobody who can take their place, atleast in the near future. People are the most important part of any business, but that’s most pronounced in case of Team UC, which has literally sailed in the toughest of waters for over a decade, all thanks to Mr. Abhiraj Bhal, Mr. Varun Khaitan and Mr. Raghav Chandra.

That’s not flattery, or misdirected praise. It’s not even praise stolen from the rest of the team. I'm sure they’re all brilliant. But I seriously think that Team UC will only go from strength to strength, if the founding team stays intact and creates a very good leadership pipeline in times to come. I’m sure they’re working on it already. But since we’ve come so far in our analysis, it makes sense to highlight this particular aspect as well. It’s important.

Once again, here’s wishing Team UC all the luck in the world and more. India is lucky to have such entrepreneurs.

P.S. You just read an honest (and hopefully valuable) article for free. And if you believe nothing good is free, and neither it should be, consider making donations. Amounts don't matter, gestures do. Here's a big cheers to all my Patrons!

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