Urban Company shares rise 5% as Morgan Stanley sees up to 40% upside

Shares of Urban Company rose over 5 percent in early trade on Tuesday, October 27, after brokerage firms Morgan Stanley and Goldman Sachs shared their views on the company's business outlook following its analyst day. Urban Company share price The stock opened at Rs 137.90 on the BSE and rallied 5.38 percent to hit an intra-day high of Rs 142.90, compared with its previous close of Rs 135.60. At time of writing the report at around 10.05 am, Urban Company shares were trading 4.98 percent higher at 142.35. Brokerages on Urban Company The brokerages have put forth mixed perspectives, balancing between Urban Company's strengthening core business and the costs of scaling new ventures.

While Morgan Stanley remains optimistic about long-term profitability and structural growth in consumer services, Goldman Sachs acknowledges the potential for growth and margin gains but adopts a more conservative stance on valuation. Morgan Stanley on Urban Company: Overweight, Target Price - Rs 190 Morgan Stanley gave an 'Overweight' rating on Urban Company, with a target price of Rs 190 per share, indicating a significant upside potential of 40 percent from the previous close. Highlighting the takeaways from analyst day, the brokerage said the improvement in growth in India's consumer services net transaction value (NTV), excluding InstaHelp, is structural rather than temporary.

Morgan Stanley also reiterated the company's outlook for achieving consolidated adjusted EBITDA breakeven by the third quarter of financial year 2028 (Q3FY28) and reaching Rs 10 billion in consolidated adjusted EBITDA by financial year 2030-31. On the company's financial standing, the brokerage firm noted that Urban Company's balance sheet is already strong, adding that the proposed fundraise is aimed at providing strategic flexibility. Goldman Sachs on Urban Company - Neutral, Target Price - Rs 130 Global brokerage firm Goldman Sachs maintained a 'Neutral' rating on Urban Company, with a target price of Rs 130 per share, below the stock's previous day closing price of Rs 135.60.

Following the analyst day, the brokerage highlighted the company could continue to grow net transaction value (NTV) its guided 20 percent-plus rate in the core business, with even stronger visibility on margins. Goldman Sachs also noted that Urban Company's core business continue to get stronger, with improving service density and partner utilisation supporting accelerating user growth. On the company's business expansion, the brokerage said Urban Company's foray into Air Conditioners is unlikely to have a material impact on capital expenditure or change the margin trajectory of its Native brand.

The brokerage also highlighted a large part of InstaHelp investment is towards market build-out, which will drop off in a few quarters, potentially helping UC reduce losses in the segment even if competition stays elevated. On the announced capital raise, Goldman Sachs said the proceeds of the capital raise could be deployed either towards mergers and acquisitions or to keep buffer against intensifying competition in InstaHelp. However, it does not expect Urban Company to enter new product categories or geographies. Urban Company Q2 results Urban Company's net loss widened to Rs 182 crore in the July-September quarter of FY27, from a net loss of Rs 59 crore in the year-ago period, as the home services platform stepped up investments in its quick services business, InstaHelp.

The company's revenue from operations rose 41 percent year-on-year to Rs 537 crore in the second quarter of FY27. On a sequential basis, the net loss widened from Rs 92.12 crore in the April-June quarter, while revenue was up 1.7 per cent. The company's board also approved raising up to Rs 2,500 crore through the issue of equity shares or other convertible securities via qualified institutional placement (QIP), subject to shareholder approval. The board also gave an in-principle approval to explore residential air conditioners as a new line of business under its 'Native' brand. The company said it already services millions of air conditioners every year, which gives it first-hand insight into product gaps and customer needs.

The company's InstaHelp segment, which offers households daily cleaning and housekeeping needs, reported a segment loss of Rs 173.12 crore in the quarter, compared with Rs 42.91 crore loss a year ago, according to the filing. Segment revenue rose to Rs 20.54 crore in Q2 FY27 from Rs 1.43 crore in Q2 FY26. Revenue from India consumer services, excluding InstaHelp, rose 28.4 per cent to Rs 336.38 crore. Revenue from 'Native' grew 39.7 per cent to Rs 105.37 crore, while that from the international business rose 82.1 per cent to Rs 75 crore. "Q2 FY27 was a strong quarter. The company's core business combined continued growth momentum with margin expansion, while it invested aggressively in InstaHelp, where unit economics improved even as the business scaled rapidly.

"The business is materially larger than at listing, growth has stepped up, and we now operate three businesses at scale with proven economics. The proposed raise of up to Rs 2,500 crore is about flexibility: it lets us invest with conviction across each of them, cement leadership in InstaHelp, and pursue inorganic opportunities selectively, without trading off one for another," Urban Company said in a statement. (With PTI inputs) Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.