SoftBank-Backed Meesho Set To Seek Up To $605 Million Via IPO
“We have been very, very focused on affordability,” Chief Financial Officer Dhiresh Bansal told Bloomberg News in an interview.
Meesho Ltd., which became an India e-commerce heavyweight by selling Temu-like low-priced offerings, plans to deploy some of the proceeds from its $606 million initial public listing to penetrate smaller towns in the world’s biggest consumer market.
“We have been very, very focused on affordability,” Chief Financial Officer Dhiresh Bansal told Bloomberg News in an interview. To propel its growth further, the Bengaluru-based firm is focused on offering the lowest prices for “each and every product and category,” he added.
The SoftBank Group Corp.-backed upstart has drawn customers by selling trendy, budget-friendly clothes with dresses priced as low as $4 and not stocking any inventory of their own. By bringing on board small-time sellers who manage their supplies — many of them in Tier 2 and Tier 3 towns — and not charging them any commission, Meesho has been able to price products as cheaply as possible.
Meesho, founded in 2015 by Vidit Aatrey and Sanjeev Kumar, got a real growth burst during the Covid pandemic when millions of Indians began to shop online. It also benefited by a gap left for value-hunting buyers after fast-fashion giant Shein was banned by India in 2020, along with dozens of Chinese apps in the aftermath of a border skirmish.
Meesho will start taking investor orders next week for a listing that is set to raise as much as 54.2 billion rupees ($606 million). It plans to offer shares in the price range of 105 rupees to 111 rupees a piece, according to a newspaper advertisement Friday. Anchor investors can bid on Dec. 2 and the public can put their orders over the next three days.
Shareholders including Elevation Capital V Ltd., Peak XV Partners Investments V, and founders plan to sell as many as 105.5 million shares in the IPO, the ad showed. The company also seeks to raise as much as 42.5 billion rupees by selling new shares.
Thrifty Spenders
Meesho, which gets nearly 90% of its orders from smaller Indian towns, is planning to tap more thrifty spenders deeper in the hinterland as it continues to challenge Amazon.com Inc. and Walmart Inc.-owned Flipkart.
“Everyone else apart from us in India is focused on big cities,” Co-founder and Chief Executive Officer Aatrey said in the interview Friday. “We focus on everyone else because our value proposition” appeals to all consumers, he added.
READ MORE: Meesho Eyes $6 Billion Valuation With December India IPO
The e-tailer’s revenue for the year ended March 31 was at 93.9 billion rupees, up 23% from the year before. Losses, however, widened more than 10-fold to 39.42 billion rupees over this period, according to its red herring prospectus. The jump in losses was partly due to one-off charges, Bansal said, as Meesho shifted its domicile to India.
For the year ended March 31 in 2023, it had a loss of 16.7 billion rupees on a revenue of 57.3 billion rupees.
The platform had 213 million annual transacting users as of June who placed a total of 561.9 million orders that were serviced by over 575,000 sellers across the country, the prospectus said.
Fund Acquisitions
“They have been growing faster than the e-commerce market, but whether they can sustain this growth rate is the question,” said Satish Meena, founder at Datum Intelligence.
Amazon and Flipkart are coming for “some of their customers” and the presence of value retailers, like Vishal Mega Mart Ltd. and Trent Ltd.’s Zudio, is also growing, he added. “It is a competitive landscape.”
While Meesho has branched off into selling accessories, electronics, home decor, footwear and kitchen staples, apparels with a 34% share remains the biggest sales contributor.
The company plans to use the IPO proceeds to fund acquisitions, invest in cloud infrastructure, building its artificial intelligence team and on marketing initiatives.
The firm is now also building out a portfolio of financial services such as buy now-pay later offerings, short term credit lines and working capital financing, Bansal told reporters in Mumbai. He declined to give a timeline for achieving profitability.
Read More: Walmart’s Flipkart Bets on Videos to Woo Indian Online Shoppers
As competition heats up from quick commerce as well as the global e-commerce giants, Meesho is leaning on AI-led backend offerings and short video-based content that are increasingly influencing the shopping patterns in China and Southeast Asia.
India should show a “similar behavior” to these regions, said Aatrey. “India is such a large opportunity for the next five years.”
