Meesho IPO: Scaling Value E-commerce in Bharat - Should You Subscribe?

At a Glance Table

(Source Chittorgarh.in)

Company and its Business Operations

Meesho Limited, incorporated on August 13, 2015 (formerly FashNear Technologies Pvt Ltd), operates a multi-sided e-commerce platform connecting consumers, sellers, Logistics partners, and content creators across India. The company was renamed Meesho in 2025 and now focuses on its e-commerce marketplace, offering affordable products through a zero-commission model for sellers and low-cost fulfilment.

Key subsidiaries include Meesho Technologies Pvt Ltd (MTPL) for e-commerce and Meesho Grocery Pvt Ltd (MGPL), which was created following the demerger in 2025. Major milestones include:
• 100 million annual transacting users in 2022
• Launched Valmo logistics
• Surpassed 500 million app downloads in 2023
• Achieved free cash flow positivity in 2024

As of June 30, 2025, Meesho had 5.75 lakh annual transacting sellers and 21.32 crore annual transacting users (ATUs).

Industry Outlook

India’s e-commerce sector continues to show robust growth, driven by expanding internet penetration, increased smartphone usage, and better data affordability. According to the Red Herring Prospectus (RHP), the total addressable market (TAM) for online retail is projected to grow at a compound annual growth rate (CAGR) of 20–25 per cent through 2025. This growth is largely fuelled by the expansion into tier-2 and tier-3 cities and the rise of regional sellers.

Globally, the e-commerce sector is growing at a CAGR of 10–15 per cent, with India being strategically positioned due to its demographic advantages and lower penetration. Meesho’s Net Merchandise Value (NMV) CAGR of 24.87 per cent from FY23 to FY25 aligns with the overall sector growth, indicating strong growth potential for the platform.

Objects of the Issue

• Investment in cloud infrastructure for MTPL: Rs 1,390 crore
• Salaries for machine learning, AI, and technology teams for MTPL: Rs 480 crore
• Marketing and branding initiatives for MTPL: Rs 1,020 crore
• Inorganic growth, acquisitions, and general corporate purposes: Remaining amount

SWOT Analysis

Strengths

• Technology-first platform with AI-driven personalisation, serving 234.20 million annual transacting users (ATUs) in the 12 months to September 2025.
• Zero-commission model and low fulfilment costs enable everyday low prices, scaling Net Merchandise Value (NMV) to Rs 29,988 crore in FY25.
• Asset-light model, with Valmo logistics handling 48 per cent of shipped orders in FY25.

Weaknesses

• Consistent losses amounting to Rs 3,941.71 crore in FY25.
• Dependence on third-party logistics and sellers exposes the company to execution risks.
• Negative operating cash flows of Rs 850.64 crore in H1FY26.

Opportunities

• Expansion into tier-2/3 cities and leveraging content commerce could drive 20–25 per cent sector CAGR.
• Increasing AI investments and new initiatives like financial services for deeper monetisation.
• Inorganic growth through acquisitions to diversify beyond the marketplace model.

Threats

• Intense competition from Flipkart and Amazon, which may erode market share.
• Potential regulatory challenges related to the gig economy and data privacy could impact operations.
• Economic slowdowns may reduce consumer spending on discretionary items.

Financial Performance Tables (Figure in Rs crore) (Source – Company RHP)

Profit & Loss

Balance Sheet

Operating Cash Flow

Peer Comparison

Outlook & Relative Valuation

Meesho’s long-term outlook remains promising, driven by 44.12 per cent NMV growth in H1FY26 and 24.87 per cent CAGR from FY23 to FY25, facilitated by expanding in tier-2/3 cities and leveraging content commerce. The company has shown impressive growth in annual transacting users (ATUs) with 234.20 million ATUs.

However, profitability remains a concern:

• FY25 loss: Rs 3,941.71 crore
• H1FY26 loss: Rs 700.72 crore
• Negative ROE: 79 per cent

Despite strong growth prospects, Meesho’s valuation appears demanding given its continued losses and negative profitability metrics in FY25. Meesho reports negative EV/EBITDA, ROE (-79.51 per cent), ROCE (-5.37 per cent), and ROA (-64.51 per cent), clearly reflecting its loss-making profile. Since its EPS is negative, traditional valuation metrics like P/E or P/B cannot be applied.

On a relative basis, the IPO’s Price-to-Sales (P/S) ratio of 5.33x at the upper price band of Rs 111 appears reasonable when compared to peers such as FSN E-Commerce, which trades around 8.3x and also reports a positive ROE of 5.16 per cent and ROCE of 9.59 per cent, underscoring its stronger financial health.

Brainbees also posts negative returns across ROE, ROCE, and ROA, similar to Meesho, though its debt/equity of 0.35x is more moderate than FSN E-Commerce’s 1.01x and Meesho’s pre-issue level of 0.67x. This highlights that while Meesho offers scale and user growth, its valuations must be viewed in light of ongoing losses, weak return ratios, and leverage that remains elevated for a business yet to turn profitable.

Recommendation

Meesho presents significant growth potential, particularly with its expansion into Bharat and strong Net Merchandise Value (NMV) growth. However, its high losses and negative return on equity (ROE) warrant caution for long-term investors. While listing gains may materialise due to its large user base and strong growth momentum, long-term sustainability will ultimately depend on a clear path to profitability and improved cash flows. We recommend Avoid for now, and advise investors to closely track the company’s progress toward profitability post-listing before considering any long-term allocation.