Urban Company will hold a board meeting on October 16 to discuss a new fundraising proposal. The company plans to issue equity shares and other securities to raise capital. This move comes as Bank of America warned that "higher competition and investments in the Instant Help services" could impact earnings.
Urban Company Ltd has scheduled a board meeting on October 16 to consider a proposal to raise funds from the issuance of equity shares and other securities, according to a regulatory filing.
The meeting will consider various options for raising funds, including equity shares, securities that are convertible into equity shares, warrants, fully convertible debentures and convertible preference shares.
The company said the proposed fundraising could be carried out in one or more tranches, subject to applicable laws and regulations.
The board will also consider the method of issuance, pricing and other terms and conditions for the proposed Securities.
Urban Company said the proposed fundraise could be undertaken through preferential allotment, private placement or a qualified institutions placement (QIP). The company may also explore other permissible routes or combination of these options.
The securities could be issued to eligible investors at prices permitted under applicable laws. The final structure and terms would be decided by the board, in consultation with lead managers or other advisers, where required.
Bank of America earlier downgraded the home-services platform to 'Underperform' from 'Neutral', pointing to stretched valuations, continuing losses and rising competition in the instant-help services business.
The brokerage said increased competition and higher investments in Urban Company's Instant Help segment could weigh on the company's earnings even as its core business continues to show improvement.
"We expect higher competition and investments in the Instant Help services to drag down overall EPS despite improving momentum at the core business," BofA said in a note, according to a report.
BofA expects competitive pressure in the segment to increase further, particularly after rivals Snabbit and Pronto raised fresh capital.
The brokerage said Urban Company's InstaHelp business could eventually become a trigger for a re-rating of the stock if the segment scales successfully. However, it expects losses to remain elevated in the near term as the company continues to invest in building the business.
The scale-up has already come with a sharp increase in losses. InstaHelp's EBITDA loss rose to Rs 1.3 billion in the first quarter of FY27, compared with Rs 100 million in the corresponding quarter of FY26.
Along with the downgrade, BofA lowered its earnings estimates for Urban Company.
The brokerage now expects the company to report an FY28 EPS loss of Rs 0.73, compared with its earlier estimate of a loss of Rs 0.59. Its FY29 EPS estimate has also been cut to Rs 1.41 from Rs 2.27 earlier.
The downgrade comes after a strong run in Urban Company shares, which had gained for three consecutive sessions following positive brokerage commentary.
Global brokerage UBS had recently initiated coverage on Urban Company with a 'Buy' rating, calling the country's online home-services market a potential "Blinkit moment".
Emkay Securities subsequently initiated coverage with a 'Buy' rating and a target price of Rs 190.
While BofA remains cautious on the near-term earnings impact of InstaHelp, Emkay sees significant room for growth in India's consumer-services market.