Rentomojo Q1 FY27: Why Profit Fell 39% Despite 51% Revenue Growth

Rentomojo's Q1 FY27 results have an unusual headline. Revenue from operations jumped 51.1% year-on-year to ₹126.33 crore, while reported profit fell 38.6% to ₹7.84 crore.

A fire at the company's Noida warehouse created an exceptional loss of ₹11.37 crore during the quarter. After adjusting for this and a deferred-tax expense, Rentomojo reports company-normalised PAT of ₹21.93 crore, up 71.8% year-on-year.

Neither ₹7.84 crore nor ₹21.93 crore should be read in isolation. The better question is whether Rentomojo's core rental business became stronger while it expanded. On that test, the operating numbers are considerably better than the reported PAT suggests.

Rentomojo Q1 FY27 Results at a Glance

The adjusted figures above are Rentomojo's own normalised measures. They are useful for understanding the underlying quarter, but they should not be confused with statutory profit.

Why Did Rentomojo's Reported Profit Fall 39%?

The main distortion came from a fire on June 10 at a sub-leased warehouse in Noida. Rentomojo recognised ₹11.37 crore as the financial impact from damaged property, plant and equipment and other assets. The company has filed an insurance claim, but the eventual recovery has not yet been recognised.

The company's PAT bridge is:

The specific Noida warehouse fire is appropriately treated as an exceptional item when assessing Q1's underlying operating performance. The deferred-tax adjustment needs different treatment. It is an accounting item rather than an operating expense, but deferred-tax movements can appear again depending on tax positions and accounting assumptions.

That is why the 71.8% increase in company-normalised PAT is useful evidence of underlying earnings growth, but it should not simply replace the reported ₹7.84 crore profit.

Did Rentomojo's Core Rental Business Actually Get Stronger?

The strongest evidence comes from two numbers viewed together.

Rentomojo increased live rental items by 41% to 9.23 lakh, yet average occupancy improved from 83.3% to 85.7%.

That matters because adding rental assets by itself does not create a better business. A sofa, refrigerator or washing machine sitting in a warehouse has already consumed capital but is not earning rent. Rentomojo expanded its rental asset base rapidly and still managed to have a greater proportion of those assets deployed with customers.

Customer demand kept pace with this expansion. Live subscribers increased 36.3% to 2.83 lakh and gross items ordered increased 45.8% to 3.29 lakh. Average revenue per item also rose 6.8% to ₹1,662.6.

The combination is more important than any one of these numbers individually. Rentomojo did not achieve 51% revenue growth mainly by raising what existing customers pay. It added customers, rented out substantially more products and earned slightly more per item while improving utilisation.

This matters even more because Rentomojo remains overwhelmingly a rental business. In FY26, roughly 97.9% of revenue from operations came from furniture and appliance rentals along with other recurring subscription revenue.

The operating test for future quarters is therefore fairly clear: Rentomojo needs to keep adding rental assets without allowing occupancy to fall. Q1 passed that test.

Is Rentomojo Maintaining Returns While Spending More on Rental Assets?

EBIT is particularly useful for Rentomojo because depreciation cannot simply be ignored.

Depreciation is an accounting charge and does not represent cash leaving the company in that particular quarter. But the reason depreciation exists is economically important here: Rentomojo's furniture and appliances wear out, become outdated and eventually need replacement.

Depreciation increased to about ₹23 crore in Q1 FY27 from ₹15.39 crore a year earlier, broadly tracking the increase in the company's rental asset base.

Even after keeping that depreciation charge in the calculation, company-normalised EBIT increased 50.8% to ₹29.19 crore. More importantly, annualised company-normalised ROCE remained at 26.6% compared with 26.4% a year earlier.

That tells us more than EBITDA growth alone.

Rentomojo expanded live items by 41%, yet the return it generated on the capital employed in the business did not weaken materially. For an asset-heavy rental model, maintaining ROCE while putting much more capital to work is one of the better signs in this quarter.

Cash generation provides a second test.

In FY26, Rentomojo generated approximately ₹172.87 crore of operating cash flow, while purchases of property, plant and equipment, including rental assets, capital advances and capital creditors, were about ₹175.8 crore.

Operating cash therefore covered roughly 98.3% of those purchases.

Management describes FY26 operating cash generation as sufficient to fund its growth capex. The broader takeaway is slightly narrower: cash produced by operations had reached almost the same level as the amount being put into property, plant, equipment and rental assets.

That is an important improvement, but it does not make Rentomojo a capital-light company. Growth still requires a large amount of money to be reinvested into assets. The improvement is that a much larger part of this requirement can now be supported internally.

The IPO may change the financing side further. Rentomojo raised ₹150 crore through the fresh-issue component and proposed using ₹70 crore to repay or prepay borrowings. Total borrowings were around ₹258.3 crore as of June 2026.

Q1 ended before the IPO. If the planned ₹70 crore debt repayment is completed, later quarters should begin reflecting a lower borrowing base. The actual interest saving will depend on when repayment occurs and which loans the company chooses to repay.

Does Rentomojo's Current Valuation Already Expect Strong Growth?

Rentomojo shares rose sharply following the results. As of 12:17 p.m. IST on October 6, 2026, the stock was trading at about ₹557, up around 9.1% for the day, with a market capitalisation of approximately ₹5,804 crore.

That is nearly 38% above the ₹404 IPO issue price and puts a demanding valuation on a company whose latest full-year revenue was ₹386.99 crore.

The difference between the two earnings multiples matters.

FY26 reported PAT of ₹104.3 crore benefited from a ₹36.64 crore deferred-tax credit. Simply subtracting that credit leaves roughly ₹67.7 crore of earnings. Using that figure produces an earnings multiple of about 86 times at the current market value.

This ₹67.7 crore figure is a simple analytical adjustment to show the impact of the tax credit; it is not company guidance or a forecast.

The reported P/E therefore makes the valuation appear materially cheaper than it looks once the FY26 tax benefit is separated.

Comparing Rentomojo with ordinary retailers is also of limited value. There is currently no directly comparable listed Indian company running the same full-stack furniture-and-appliance rental model at a similar scale.

Investors are consequently paying primarily for Rentomojo's own ability to sustain high revenue growth, keep rental assets occupied and generate strong returns on the capital required to buy those assets. At roughly 15 times FY26 sales and around 86 times FY26 earnings after adjusting for the deferred-tax credit, future execution has to remain strong for today's valuation to hold up.

What Should Investors Watch After Rentomojo Q1 FY27?

Six metrics should tell investors whether Q1 was the start of a durable trend or simply a particularly strong quarter.

Occupancy: Average occupancy was 85.7% in Q1 FY27. Growth becomes less attractive if Rentomojo keeps purchasing assets but utilisation begins falling.

Subscriber and live-item growth: The company needs customer growth to remain broadly aligned with expansion of its rental asset base.

Normalised ROCE: Q1's 26.6% annualised normalised ROCE was almost unchanged year-on-year. A sustained decline here would suggest that newer capital is producing weaker returns.

Operating cash versus rental-asset investment: FY26 operating cash covered about 98% of PPE and rental-asset purchases. Whether Rentomojo can maintain that relationship while growing will be central to the self-funded growth argument.

Post-IPO finance costs: If the proposed debt repayment reduces the borrowing base, finance costs should eventually reflect it. The timing will matter.

Noida warehouse insurance claim: Any recovery should be separated from recurring earnings when it is recognised, just as the original warehouse loss should be separated when analysing the underlying quarter.

Rentomojo's Q1 FY27 was operationally much stronger than the 39% fall in reported PAT suggests. The warehouse fire materially distorted statutory profit, while live assets increased 41%, occupancy improved and normalised ROCE stayed around 26.6%.

But the stock's valuation has also moved well ahead of the IPO price. The next phase of the Rentomojo story therefore has a measurable test: sustain high occupancy and stable returns on capital while increasingly financing rental-asset growth through cash generated by the business itself.