Urban Company Closes Saudi Unit Amid Rising Financial Losses

144

In a significant strategic shift, Urban Company has initiated the closure of its Saudi Arabian step-down unit, Urban Company Arabia for Information Technology (UCAIT), following persistent financial losses. The move, revealed through the company’s Draft Red Herring Prospectus (DRHP) filed ahead of its upcoming IPO, underscores the challenges Indian startups face while scaling operations in international markets.

Urban Company Saudi Unit, once the company’s key venture in the Middle East, failed to achieve profitability since its incorporation in 2021. UCAIT posted a staggering 182% year-on-year increase in losses in the nine months ending December 2024, with pre-tax losses rising to ₹23.45 crore from ₹8.29 crore the previous year. The startup’s decision to transfer operations to a new joint venture, Waed Khadmat Al-Munzal for Marketing, formed in partnership with Saudi Manpower Solutions Company (SMASCO), reflects a tactical pivot to salvage regional prospects.

Founded in 2014 by Abhiraj Singh Bhal, Varun Khaitan, and Raghav Chandra, Urban Company has emerged as a leading tech-enabled services marketplace in India. It connects customers with verified professionals for home maintenance, cleaning, beauty, and wellness services. Despite its global ambitions, its overseas operations in Singapore, UAE, and now Saudi Arabia have struggled to replicate the domestic success.

The IPO-bound unicorn plans to raise ₹1,900 crore, with a fresh issue of ₹429 crore and an offer-for-sale worth ₹1,471 crore. The founders, who exited part of their holdings via secondary sales worth ₹779 crore between September 2024 and March 2025, will not participate in the OFS.

Urban Company Saudi Unit’s winding down highlights the need for cultural localization, operational flexibility, and long-term patience when entering foreign territories. As Indian startups scale globally, the lessons from this episode will serve as a critical reference for entrepreneurs and investors alike.

1. Understanding Urban Company: Business Model, Founders, and Offerings

1.1 Origin and Vision

Urban Company was founded in 2014 by three IIT and IIM alumni – Abhiraj Singh Bhal, Varun Khaitan, and Raghav Chandra. Their vision was to organize the fragmented home services market using technology.

1.2 Business and Revenue Model

Urban Company operates a tech-enabled full-stack marketplace. It connects users with service professionals for home cleaning, beauty, repairs, appliance servicing, and wellness. The company earns through service commissions, subscription plans, training modules, and supply sales.

1.3 Funding and Growth

Backed by marquee investors such as Tiger Global, Accel India, Elevation Capital, Bessemer Venture Partners, and VY Capital, Urban Company raised over $445 million across funding rounds. Its valuation crossed the $2 billion mark, cementing its unicorn status.

1.4 Global Expansion Attempts

Urban Company expanded operations to the UAE, Singapore, Australia (now exited), and Saudi Arabia. Each geography had unique challenges, with Saudi Arabia being the latest to undergo strategic restructuring.

2. Urban Company Saudi Unit: Entry, Struggles, and Closure

2.1 Entry into Saudi Arabia

Urban Company launched its Saudi unit in 2021, operating through its step-down subsidiary, Urban Company Arabia for Information Technology (UCAIT). The goal was to offer localized home service solutions in partnership with trained local professionals.

2.2 Financial Losses Mount

The Urban Company Saudi Unit recorded escalating losses since its launch.

• FY22: ₹10.10 crore loss before tax
• FY23: ₹17.77 crore loss before tax
• FY24: ₹14.08 crore loss before tax
• 9M FY25: ₹23.45 crore loss before tax

This continuous financial drain made sustainability difficult, pushing the company to re-evaluate its operations.

2.3 New Joint Venture Strategy

In October 2024, Urban Company teamed up with Saudi Manpower Solutions Company (SMASCO) to launch Waed Khadmat Al-Munzal for Marketing. Effective January 1, 2025, this joint venture assumed control of Urban Company Saudi operations, aiming for deeper localization.

2.4 Reasons Behind Closure

• Inability to achieve profitability despite three years of operations
• Regulatory and cultural complexities
• Professional workforce shortage
• Lack of localization despite early investment

3. IPO Ambitions Amid Strategic Reset

3.1 Public Issue Details

Urban Company filed its DRHP on April 28, 2025, planning to raise ₹1,900 crore. The IPO includes:

• Fresh issue: ₹429 crore
• Offer-for-sale (OFS): ₹1,471 crore

3.2 Major Selling Shareholders

• Accel India: ₹433 crore
• Elevation Capital: ₹346 crore
• Tiger Global: ₹303 crore
• VY Capital: ₹216 crore
• Bessemer India: ₹173 crore

3.3 Founders’ Stake Sales

From September 2024 to March 2025, founders sold shares worth ₹779 crore in secondary deals. They are not participating in the OFS.

4. Challenges in Overseas Markets

4.1 Shortage of Service Professionals

Urban Company Saudi Unit and its international arms in the UAE and Singapore reported recurring challenges in sourcing reliable service professionals.

4.2 Delayed Break-even Timelines

CEO Abhiraj Singh Bhal noted that Saudi Arabia was still in “investment mode” and required more time to mature, unlike the UAE which is nearing break-even.

4.3 Cultural and Operational Friction

Localization of training, regulation adherence, and customer trust-building remained major hurdles in international markets.

5. The Bigger Picture: Indian Startups Eyeing IPOs

5.1 Urban Company Joins IPO Race

Urban Company joins the likes of boAt, Physics Wallah, Smartworks, BlueStone, and Aye Finance, which have filed DRHPs in recent months.

5.2 2025 IPO Pipeline

Over 20 tech startups including Ola Consumer, Cars24, Rebel Foods, Meesho, and Groww are expected to go public in 2025.

6. Learning for Startups and Entrepreneurs

6.1 Global Expansion Is Not a Copy-Paste Game

Every market needs its unique operational and cultural blueprint. What works in India may not apply elsewhere.

6.2 Financial Prudence Over Aggressive Expansion

Startups must evaluate ROI and sustainability before going global, especially in non-mature service economies.

6.3 Joint Ventures Can Offer Strategic Leverage

Partnering with local firms can help reduce regulatory burdens and increase acceptance in new markets.

6.4 Domestic Focus Remains Crucial

While global growth is attractive, founders must not overlook the potential within India’s booming middle class and growing urban demand.

The Startups News: Your Trusted Lens on Startup Developments

When it comes to comprehensive and humanized coverage of India’s startup world, The Startups News brings clarity, context, and credibility. If you’re tracking startup expansions, international strategies, and IPO stories like the Urban Company Saudi Unit, our platform offers deep-dive insights tailored for entrepreneurs, investors, and analysts alike. Stay ahead of startup trends, funding news, and global expansions only at The Startups News.