Bengaluru/Mumbai: Urban Company’s early investors Steadview Capital, Elevation Capital and Accel are looking to sell a part of their stake in the home services platform, which is expected to create a combined liquidity of $100-150 million for the venture capital firms.

The secondary sale will happen at a valuation less than the $2.6 billion Urban Company was estimated to be worth when it previously raised capital in 2022, according to three people familiar with matter.

To be sure, in a secondary transaction, shareholders sell their stake to existing or new investors and no new capital is injected into the company. These transactions generally take place at a discount to the primary shares.

“The stake sale comes as some of the investment firms are sitting at the end of their fund life cycle and are looking to monetize their shareholding and create some liquidity before they raise their next fund,” one of the people cited above said.

“Accel may look to offload nearly half of its stake while the others are still evaluating how much to sell,” this person added.

The transactions are part of a broader shuffle of Urban Company’s capitalisation table ahead of its plans to tap the public markets in the next 12 months.

Urban Company said it would not comment on what it termed market rumours. Steadview Capital, Elevation Capital and Accel did not respond to Mint’s queries emailed on Monday.

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Secondaries in vogue

In 2021, Urban Company detailed plans for an initial public offering of its shares by 2023. The following year, it onboarded four independent board members—Ashish Gupta, Ireena Vittal, Deepinder Goyal, and Shyamal Mukherjee—in preparation for a public listing. However, the plans were deferred, and the company is currently targeting an initial public offering of its shares next year.

In July, India-focused investment firm Dharana Capital purchased shares worth ₹400 crore, or $50 million, in Urban Company from the firm’s employees and shareholders. That transaction allowed Titan Capital, founded by Kunal Bahl and Rohit Bansal, to sell its investment in the company, logging returns of nearly 200 times on its 9-year-old seed cheque of ₹57 lakh.

India’s startup ecosystem is seeing a growing trend of secondary transactions. Several investors who are approaching the end of their fund life cycle are looking to exit their investments and return capital to their limited partners, or LPs, who are investors in venture capital funds.

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Several large-ticket deals that have occurred recently are seeing a mix of primary and secondary transactions.

In June, Singapore’s state-owned investment firm Temasek and Fidelity Management & Research Company purchased eyewear retailer Lenskart’s shares worth $200 million in a secondary transaction. The following month, beauty retailer Purplle raised ₹1,000 crore in a funding round that was a mix of primary and secondary shares, led by the Abu Dhabi Investment Authority, a sovereign fund.

Last year, investment exits from startups surged by almost 1.7x to reach $6.6 billion as investors sought to provide liquidity to their LPs in a high-interest-rate environment, Bain said in its recent India Venture Capital report. It added that secondary and strategic sales also increased in value, primarily driven by mega exits in consumer tech companies such as Flipkart and Lenskart.

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A push towards profitability

Gurugram-based Urban Company last raised $255 million in its series F funding round led by Prosus, Dragoneer and Wellington Management in June 2021 at a valuation of $2.1 billion. 

The round also saw participation from other prominent investors including Vy Capital, Tiger Global and Steadview. It included a primary capital infusion of $188 million and a secondary sale of about $ 67 million by select angels and early investors, the company had said at the time.

Urban Company had added that it would use the funds raised to increase its footprint across India and enter international markets while enhancing other aspects of the business.

Founded in 2014 by Raghav Chandra, Abhiraj Singh Bhal and Varun Khaitan, Urban Company—a technology marketplace for home services such as beauty and spa, cleaning, plumbing, and appliance repair—also ventured into branded home appliances last year with the launch of a range of water purifiers.

The company has operations in more than 50 Indian cities as well as in the UAE, Saudi Arabia, and Singapore.

Urban Company’s revenue from operations rose to ₹827 crore in the fiscal year ended March from ₹637 crore in the prior year. Its losses before tax narrowed by 70% to ₹93 crores. For the first quarter of 2024-25, the company said it had recorded a consolidated revenue of ₹281 crore, a 37.3% rise from the same period a year earlier, and a profit before tax of ₹12 crore.

“This growth was achieved on the back of investments in service quality, partner training and enablement, technology development and the launch of Native RO water purifier devices,” Urban Company said in a recent blog. “We also made meaningful progress towards improving profitability driven by operational leverage and driving efficiency across cost lines.”

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