Home service marketplace Urban Company turned out to be one of the handful of companies to have attained unicorn status with over $2 billion valuation after raising $255 million primarily from Prosus in FY22. The large funding has worked well for the company as apparent from its growth in scale during FY22.
Urban Company’s operating revenue grew 76.7% to Rs 437.6 crore during the fiscal year ending March 2022, as per its annual financial statements with the Registrar of Company (RoC). However, this growth has come on the back of a 90% surge in expenses which jumped over Rs 1,000 crore during the last fiscal year (FY22).
Coming back to its collection in FY22, Urban Company’s revenue from the sale of services (on demand home services) turned out to be the primary source of revenue. Revenue from this vertical grew nearly 76% to Rs 345 crore during the last fiscal year while collection from sales of products surged 82% to Rs 91.7 crore. The sale of products primarily comprises a range of private labels which the company primarily pushes in the beauty and grooming space.
Urban Company operates with ten supporting subsidiaries based out of India, Singapore, Australia, Saudi Arabia, Netherlands, UAE and the United States of America. The company earned 90% of its revenue from India with the remaining 10% coming from the subsidiaries outside.
On the expense front, employee benefits expense emerged as the largest cost centre for the company contributing 43.4% to the total annual expenditure. The cost shot up 95.6% to Rs 444 crore during FY22 from Rs 227 crore in FY21. This cost includes Rs 203 crore as ESOP expenses.
During FY22, the company rewarded its former and current employees with an ESOP liquidity program worth $7.3 million (Rs 55 crore). The company’s valuation jumped from $2.1 billion to $2.8 billion during the ESOP sale program.
Urban Company also incurred Rs 65.74 crore as contractual employee expenses that ballooned over 3X during FY22.
Marketing cost and cost of goods sold were the other major costs which surged 88.2% and 59.5% to Rs 220.6 crore and Rs 71.27 crore respectively during the fiscal year ending March 2022. Significantly, the cost of personal protective equipment (PPE) and safety material distributed to service professionals soared 84% to Rs 38.65 crore in FY22 from Rs 21 crore in FY21.
During the fiscal year (FY22), Urban Company also incurred Rs 23.3 crore as IT cost which includes software, payment gateway, and hosting charges among others. In total, the Gurugram-based company recorded Rs 1,023 crore expenses which increased 90% as compared to Rs 539 crore in FY21.
In line with the annual expenditure, losses of the company also shot up over 2X to Rs 514 crore in FY22 from Rs 249 crore in FY21. On a unit level, the company spent Rs 2.34 to earn a rupee of operating revenue.
The EBITDA margin of Urban Company worsened to -93.84% in FY22 which can be attributed to staff and marketing costs that surged at a high pace during the year and contributed nearly 70% to the total expenditure of the company.
For Urban Company, the inability to rein in costs should be a definite worry as most observers would have imagined the pandemic period to be a great opportunity for the firm. With both grooming and repairs and maintenance services seeing high demand, the firm did make a huge effort to take advantage, as seen by its rising promotion costs. The concerted bid to sell more products under its own labels is also visible. But the pressure of operating in marketplaces that are largely unorganised will always tell, and one would have to say the firm is still searching for long term sustainability.