Urban Company shares slide 7% as Q2 net loss triples YoY on InstaHelp burn. Should you buy, sell or hold?

Agencies

InstaHelp, the company’s quick home services business, fulfilled 6.2 million orders during the quarter, up 63% sequentially.

The wider loss came as the company stepped up investments in its quick services business, InstaHelp.

Urban Company’s revenue from operations, meanwhile, increased 41% year-on-year to Rs 537 crore in the second quarter of FY27.

Net transaction value (NTV) rose 39% YoY to Rs 1,432 crore, while orders delivered jumped 103% YoY to 15.1 million. Annual transacting users rose 35% to nearly 10 million.

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The company’s consolidated adjusted EBITDA loss stood at Rs 144 crore, reflecting an investment of Rs 174 crore in InstaHelp. Excluding InstaHelp, adjusted EBITDA increased 213% YoY to Rs 30 crore.

Urban Company said its consolidated NTV had grown around 40% YoY for three consecutive quarters, supported by new user acquisition, repeat usage and expansion into newer markets. New user acquisition increased 46% YoY over this period.

InstaHelp, the company’s quick home services business, fulfilled 6.2 million orders during the quarter, up 63% sequentially. NTV increased 34% quarter-on-quarter to Rs 71 crore. However, net order value declined to Rs 114 from Rs 138, reflecting competitive intensity and introductory pricing for new users.

Urban Company said it remains on track to achieve adjusted EBITDA breakeven by the third quarter of FY28 and adjusted EBITDA of Rs 1,000 crore by FY31.

Motilal Oswal on Urban Company share price

Motilal Oswal maintained its ‘Neutral’ rating on the shares of Urban Company, but reduced its target price to Rs 165 apiece, implying a little over 4% upside potential from the stock’s previous closing price. The domestic brokerage noted that the company’s consolidated NTV was largely in line with its estimate, and penetration in the largest categories remains below 10% in the top eight cities, leaving room for further growth.

However, NOV continued to dip, and steady-state economics require pricing of Rs 200 per hour and NOV of Rs 300, against a worker payout of Rs 150 per hour. “We believe the key monitorable is the pace of pricing normalisation, as higher order volumes at current pricing may not translate into sustainable unit economics. InstaHelp is targeting breakeven by FY31, and we factor in continued investments over the next few years,” Motilal Oswal said.

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While Urban Company remains well positioned to benefit from the long-term growth of home services, Motilal Oswal believes the core business is largely reflected in current valuations. Continued investments in InstaHelp and limited visibility on the pace of profitability through FY31 keep the risk-reward balanced, in the brokerage’s opinion.