Meesho shares double from IPO price: What's driving the surge?
What's the story
Meesho, the Indian e-commerce platform, has seen its shares surge by 8% to a record high of ₹233 on Thursday. The rise comes just seven sessions after the company's stock market debut and takes its total gains to an impressive 110% from the issue price of ₹111 per share. The surge has also pushed Meesho's market capitalization past the ₹1 lakh crore mark.
Market analysis
UBS's bullish outlook on Meesho
The latest surge in Meesho's shares comes after international brokerage firm UBS initiated coverage with a 'Buy' rating and a target price of ₹220. The company's asset-light, negative working capital business model has allowed it to generate consistent positive cash flows, unlike many other internet-led businesses. UBS predicts a robust 30% CAGR in Net Merchandise Value (NMV) over FY25-30E, with contribution margins and adjusted EBITDA margins improving to 6.8% and 3.2%, respectively, by FY30E.
Business expansion
Meesho's growth trajectory and market debut
UBS expects NMV growth to be driven by a sharp rise in annual transacting users from 199 million to 518 million. The firm also anticipates an increase in annual ordering frequency from 9.2 to 14.7, despite average order values moderating from ₹274 to ₹233 as the company passes on logistics efficiencies to the broader ecosystem. Meesho made its stock market debut on December 10, closing its first session at a whopping 53% premium over the IPO price of ₹111.
Investor response
Meesho's IPO and market performance
Meesho's three-day IPO, which was over ₹5,000 crore in size, received a strong response from institutional and retail investors alike. The issue was subscribed 79 times overall with the retail portion being subscribed more than 19 times. After a two-day decline following its debut, the stock gained over 3% on Monday before extending its rally on Tuesday even as broader markets remained under pressure.