Rentomojo to raise Rs 1,256 crore via IPO; rich valuation a concern

ET Intelligence Group: Rentomojo, an online rental platform for furniture and appliances, plans to raise ₹150 crore through a fresh issue towards repayment of debt and payment of lease rental. It will also raise ₹1,105.6 crore through an offer for sale. The promoter group's stake will fall to 19.9% after the IPO from 21.5%. The company provides consumers with long-term subscription plans enabling them to rent, return, upgrade and relocate products. About half of its revenue comes from furniture rentals. The company has demonstrated strong revenue growth, improving profitability and high return ratios. However, the IPO valuation looks rich. In addition, the company faces litigation from one of the co-founders, Ajay Nain who filed a petition in March with the National Company Law Tribunal (NCLT), seeking to declare his stake sale in August 2023 to be void and removal of the company's promoter Geetansh Bamania from the board. Unless settled amicably, the legal battle may weigh on the stock after listing. Given these factors, investors with high-risk appetite and long-term horizon may consider the IPO.

Business

Incorporated in 2012, Rentomojo is a direct-to-consumer (D2C) online rental and subscription platform. Its product portfolio includes beds, mattresses, washing machines, refrigerators, wardrobes, sofas, televisions and water purifiers. Its active subscribers jumped to 253,825 in FY26 from 149,498 in FY24 with repeat order increasing to 50.4% from 47.3%. Occupancy rate, which measures the proportion of rental assets deployed with customers, moderated to 83.3% in FY26 from 86.4% in FY24 as live items grew to 851,184 in FY26 from 463,130 in FY24.

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Financials

Between FY24 and FY26, revenue from operations increased 41.7% annually to ₹387 crore and net profit surged 115.7% to ₹104.3 crore. Operating profit before interest, tax, depreciation and amortization (EBITDA) jumped 44.6% to ₹163.5 crore during the same period. EBITDA margin improved to 41.5% in FY26 from 39.9% in FY24. Cash flow from operations grew 37.4% to ₹172.9 crore in FY26 over FY25. Return on net worth soared to 43.5% in FY26 from 27.7% in FY24.

Valuation

The company has no comparable listed peer. Considering the post-IPO equity and FY26 net profit, the company demands price-earnings multiple of 41 and price-sales multiple of 11.