Rentomojo IPO: A Great Business, Priced for the Exit

Rentomojo is a genuinely good business. That is not the debate. The debate is the price - and who is selling. This is India's first listed furniture-rental company, coming to market in the middle of the country's busiest-ever IPO season, and once you look under the headline profit, the story gets a lot more interesting than "new-age company turns profitable."

The IPO in brief

Rentomojo's issue is ₹1,255.6 crore, price band ₹384-404, and it opened on 9 September 2026 - one of six mainboard IPOs to open on the same day, the first such rush in about 30 years. At the upper band the post-issue market cap is roughly ₹4,246 crore. The grey-market premium is running around ₹130-140 (~32-35%), and the book was fully subscribed on day one.

But here is the number that frames everything: of the ₹1,255.6 crore, only ₹150 crore is a fresh issue - the other ₹1,105.6 crore (88%) is an offer for sale. Existing shareholders are doing almost all of the selling. Hold that thought.

The operating story is genuinely strong

Let me be fair to the business first, because it deserves it.

Revenue nearly doubled in two years, EBITDA margins sit above 40%, and - unlike most new-age listings - the company throws off real cash (₹173 crore of operating cash flow in FY26) and earns a 25.3% ROCE. Operationally it has 2.54 lakh subscribers across 29 cities, 20 warehouses, 82 stores and 83.3% asset occupancy, and it claims roughly 55% subscriber share of the organised market.

And the model is more than a marketplace: Rentomojo owns the assets, rents them out, services them, redeploys them across multiple cycles, and eventually resells them. It is an asset-backed, recurring-revenue business with a re-commerce tail. That is a genuinely good engine.

The profit spike nobody is talking about

Now the part that gets glossed over in the headlines. FY26 PAT "jumped 142%" to ₹104.3 crore. But look one line up: PBT was only ₹67.7 crore. The gap is a one-time ₹36.64 crore tax credit (a deferred-tax benefit) - not operating profit.

To be clear, I am not calling this fake or poor-quality profit. The underlying business still generated ₹163.5 crore of EBITDA and ₹173 crore of operating cash flow - that is real. The point is narrower and it matters enormously for valuation: if you use the reported ₹104.3 crore PAT and assume that tax benefit repeats, you will badly overstate the earnings power.

Here is what that does to the multiple at a ₹4,246 crore market cap:

The market is quoting "~41x." The number I would put front and centre is closer to ~80x. That single adjustment is the whole valuation debate.

The debt story - one correction worth making

It is tempting to say "debt is falling." It is not. Borrowings actually rose over the three years: ₹147.2 cr → ₹154.6 cr → ₹187.6 cr. What improved is leverage relative to equity - because net worth grew faster - so D/E fell from 1.05x to 0.63x, and finance cost eased from roughly ₹33 crore to ₹25 crore. The IPO earmarks ₹70 crore of the ₹150 crore fresh issue to repay debt, which should trim interest further. So: healthier balance sheet, yes; shrinking debt, no. Precision matters here.

Rentomojo vs Furlenco (and why Rentickle is not a peer)

There is no listed Indian peer, so the honest comparison is with unlisted Furlenco, which has also just turned profitable.

*Rentomojo's FY26 PAT includes the ₹36.64 cr tax credit, so the PAT-margin comparison is not apples-to-apples.

The interesting twist: Furlenco actually grew faster in FY26 (61.9% vs 45.5%), and its own turnaround is striking (from a ₹130 cr loss in FY24 to a ₹58 cr profit in FY26). But Rentomojo is the better-quality financial business - higher EBITDA margin, lower leverage, higher ROCE, and strong cash generation. Studying Furlenco actually made me like Rentomojo's business more, not less. Rentickle, at about 7% of Rentomojo's revenue and still loss-making, is evidence the category has small players - not a valuation benchmark.

Why now? Because the sellers wanted a door - and the market opened one

This is the heart of it. Why is a 2014-vintage, finally-profitable company coming to market now, structured as 88% OFS?

Two forces line up. First, the business finally gave its backers a sellable story - the FY25/FY26 profitability turn (helped by that tax credit) is what lets a furniture-rental company be priced at a ₹4,246 crore, 40x-plus valuation at all. You cannot exit a loss-maker at this multiple; you can exit a "profitable category leader." Second, the timing is the best India has ever offered a seller - six mainboard IPOs opened the very same day, GMPs are buoyant, and retail demand is euphoric. If you are a long-tenured VC (Accel, Chiratae, Edelweiss, IDG and others) looking for liquidity, this is the window.

So I would frame it precisely, not sensationally: this is predominantly a liquidity event rather than a growth-capital raise. It is not that there is zero fresh money - ₹150 crore is real, and ₹42.5 crore of it funds warehouse and store leases. It is that the business already built its asset base and reached profitability, and the dominant purpose of the offer is to let early investors monetise, at a price the current market happily supports.

Red and amber flags from the RHP

🔴 Valuation - ~41x reported, ~63x on PBT, and ~80x+ once you normalise the tax benefit, with no listed peer to sanity-check it against.

🟠 88% OFS - the people who know the business best are the ones selling ₹1,106 crore of it.

🟠 Profit quality - FY26 PAT materially helped by the ₹36.64 crore one-time tax credit.

🟠 Geographic concentration - the top 10 cities contribute roughly 89.5% of revenue. This is a metro story, not yet a national one.

🟠 Asset-heavy model - owning the furniture means continuous capital to buy, store, move and refurbish it; reported profit is also sensitive to depreciation-life and residual-value assumptions, which are worth reading carefully in the RHP.

🟠 Debt rose in absolute terms over FY24-26 (even if D/E improved).

🟠 Litigation disclosed involving the company, promoter and certain directors.

The GMP

As of 9 September the grey-market premium was around ₹130-140, or ~32-35% over the ₹404 upper band - and the issue was fully subscribed on day one. Worth remembering that this same GMP was only ~8-10% just days earlier (around 4 September) before the listing-week frenzy; grey-market signals are volatile, sentiment-driven, and tell you nothing about whether ₹404 is a fair long-term price. Treat the GMP as a mood ring, not a valuation.

My take - would I go in, wait, or avoid?

Here is where I land, honestly. I like the business. It is profitable, cash-generative, the category leader, and comparing it to Furlenco only raised my regard for its financial quality. If this listed at a sane multiple, I would want to own it.

But at ₹4,246 crore you are paying ~41x reported and closer to ~80x once you strip out a tax benefit that may not repeat - and 88% of the money is going to insiders walking out the door. When the smartest, earliest money is the seller at this price, the burden of proof shifts to the buyer: what future growth am I paying for that they are choosing not to wait around for?

So, plainly:

• Chase it at the top band or for the listing pop? No. That is a GMP momentum trade, not an investment - fine if you know that is the game you are playing, but do not confuse it with buying value.
• My own preference: I would wait. Let the listing euphoria settle, and watch the first couple of quarters as a public company - does 40%+ growth hold, do margins hold without a tax tailwind, and does the expansion beyond the top-10 metros actually work? If the normalised multiple compresses to something reasonable after a post-listing cool-off, this becomes a business I would genuinely want to buy.
• Avoid entirely? Only if you cannot stomach paying a premium for quality at all - because the quality here is real; it is purely the entry price that is the problem.

My scorecard: Business 🟢 · Growth 🟢 · Margins 🟢 · Cash flow 🟢 · Balance sheet 🟠 · IPO structure 🟠 · Profit quality 🟠 · Valuation 🔴.

Good business. Interesting category. But the IPO price leaves very little room for disappointment - and the people selling seem to know it.

Educational purposes only, not investment advice. DYOR.

Sources: Rentomojo RHP / DRHP and IPO disclosures (issue size, OFS/fresh split, use of proceeds, FY24-26 financials, risk factors); The Economic Times, Reuters, Business Standard, Groww and Chittorgarh reporting on the IPO (Sep 2026); House of Kieraya / Furlenco and Rentickle financials via public filings and Inc42/Chryseum data. Figures are approximate and as of the IPO - verify live before acting.

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