Rentomojo IPO Analysis: The Story of Depreciating a Ten-Year Sofa

Who decides how long a rented sofa lasts?

Your answer to this question decides what you may think of Rentomojo's business prospects.

Let me break it down:

Rentomojo is in the business of renting furniture and appliances to urban Indian renters on monthly subscriptions. It buys the assets on its own balance sheet, delivers and installs them, services them for the life of the contract, takes them back, refurbishes them, and redeploys them to the next subscriber - repeatedly.

From the looks of it then, two things need to sustain for the above to work.

1. a)

   People wanting to rent furniture and home appliances

2. b)

   The company assets lasting long enough for repeat renting.

Let's work with the latter first, and deal with the former in the next section.

For a company in the business of leasing assets, depreciationiThe annual charge that spreads an asset's cost across the years it is expected to earn. For a rental book it is the main cost of goods sold, not an add-back. isn't just another line item that you add back to assess business performance. It is pretty much the centerpiece of the cost of goods sold. And an asset's useful lifeiThe number of years management estimates an asset will remain economically productive. It is an estimate, set by the company, and it sets the depreciation rate. determines how much depreciation is charged. Longer life, lower annual depreciation.

And much like anything you buy for regular usage doesn't immediately lose value (but does so over time) - Rentomojo's interests lie in their assets lasting as long as possible.

In fact, between FY24 and FY26, the company extended the useful lives of their assets twice in their financial disclosures based on "technical evaluation and consequent advice" (whatever that means) from an unnamed evaluator and no third-party studies. Indicating that the company believes they can rent the same article repeatedly and for longer

Hmm, what would convince management of something like that? The most natural answer is that assets that are currently leased out proved to be more durable than initially thought - leading to the conclusion that they can contribute to the top line for longer.

Here's the thing though - they haven't. The company's losses from disposing of items that lost value (and/or functionality) have grown at a terrifying 91% CAGRiCompound annual growth rate. The steady yearly rate that would take a figure from its starting value to its ending value. between FY24-26 while the gross blockiThe total original cost of all the assets the company owns, before any depreciation is deducted. For a rental book it is the size of the fleet. grew at 69%. Meaning, the rate at which assets die prematurely outran the rate at which the company bought assets.

₹6.51 crore of assets were scrapped in FY26 before they finished their economic life - three times the FY24 figure, in a company that just told its auditors those assets would last longer.

And that very notification to the auditor (i.e., extending the assets' useful life) was worth 40.7% of FY24's reported profit.

So, to come back to our initial question: who decides how long a rented sofa lasts? A renter responsible for the regular cigarette burns, food spills, and fabric tears? Or a company that benefits from looking the other way and claiming mint condition?

Rentomojo's RHPiRed Herring Prospectus. The pre-IPO document filed with SEBI setting out financials, risk factors and the structure of the offer. uses the word 'FlywheeliA self-reinforcing loop where each turn of the business makes the next turn cheaper — more scale lowers unit cost, which funds more scale.' seventeen times.

A flywheel has a testable property - each turn should be cheaper than the last.

This brings us to the question we posed in the previous section: how many people want to rent furniture and home appliances?

We can answer that, and test the flywheel, with three things. Let's hop in:

1. a)

   Tenure: Average subscription period fell 18.82 → 18.04 months in FY26

2. b)

   OccupancyiThe share of the company's owned items that are out on rent and earning at any given time. Idle stock still depreciates.: Occupancy fell 86.43% → 83.34% over FY24–26

3. c)

   Costs: Logistics 7.20%→7.23% of revenue; manpower 7.76%→9.82%

Every leading indicator - funnel, organic share, tenure, occupancy, attrition - also moved the wrong way in FY26. To illustrate:

p. 193, 218 of the RHP mention that "a meaningful portion of traffic and demand is anticipated to originate organically".

Organic, i.e. not bought. Yet, Rentomojo's performance marketing expense is up 86.3%, and total marketing is up from 3.52% to 6.69% of revenue in two years.

While organic traffic share fell from 67.31% to 61.37%. Web traffic grew only 7.3%.

So from the looks of it the direction of travel is towards paid acquisition, not away from it.

Not all is bad, though; what we can say is that the subscription stack genuinely works right now - 99% realisation, repeat orders at 50.41%, an app rating of 4.64. And strong growth coming from items per user, price, and a new damage-waiver fee.

Damage-waiver, what? Yeah, let's deal with this in the next section.

Rentomojo has never generated free cash flow. Next year it probably will. And it will get there by spending less, not earning more.

Cash conversion was never the problem - Op. Cash Flow to EBITDAiEarnings before interest, tax, depreciation and amortisation. A rough proxy for operating cash generation before financing and accounting charges. has sat near 1.0x throughout. CapexiCapital expenditure. Cash spent buying the assets that go out on rent, which is what makes this a balance-sheet business rather than a platform. was. And capex growth halved, from +43.7% to +20.2%.

Which sets up a genuine strategic choice in setting the tone for the future.

1. a)

   Harvest: keep capex tight, let cash build, become a boring profitable rental book. Or

2. b)

   Pivot: water purifiers, new cities, new categories - and stay cash-negative for another three years.

The new damage-waiver feeiAn optional monthly fee under which the company agrees not to recover specified damage and repair costs from the subscriber — an insurance-like charge on an asset it already owns. can be thought of as Rentomojo dipping its toes into the insurance business and a way to pivot from a potentially stagnating vertical.

Harvesting means conceding the category to potential competitors who are coming in thick and fast (e.g. Furlenco is growing 62% a year and earned about ~88% of Rentomojo's normalised PAT in FY26).

Spending means asking a market to wait and watch while it continues to be cash flow negative.

Here's the interesting bit though - who decides the direction may not be an answer as simple as 'The Founder'.

Pre-offer, the five largest financial investors hold 54.74% of Rentomojo (with Accel VC holding 40% of that) while the founder owns only about 15%.

Practically, this means that post listing control sits with financial investors who are simultaneously selling into the IPO. The question of alignment isn't whether the founder is committed, it is whether a board dominated by existing investors governs for the long run or for the next deal.

Moving forward, the macro case for Rentomojo is solid.

High-GDP markets (US, Japan, UK, China) never scaled rental because furnishing is cheap relative to income and mobility is low; low-GDP markets (Vietnam, Indonesia) didn't because rentals come furnished or rental housing penetration is too low. India uniquely combines high furnishing cost + high mobility + low furnished-stock + high rental penetration.

That is a real structural gap. In India, ~80% of rental stock is unfurnished or semi-furnished - the setup burden falls on the tenant. So the target cohort exists, and it is a promising one.

What remains to be seen is how Rentomojo captures their imagination while directly competing with co-living operators, OEMs diversifying into rentals, and companies like Furlenco that are operating with experienced institutional backing that Rentomojo lacks.