Why Meesho is pricing its IPO more conservatively
What's the story
Meesho, the social-commerce platform, is gearing up for its much-anticipated stock market debut. The company has opted for a conservative pricing strategy, setting its IPO price band at ₹105-111 per share. At the upper end of this band, Meesho will be valued at ₹50,096 crore and raise ₹5,421 crore through the public offering.
Investor sentiment
Meesho's IPO structure indicates investor confidence
Meesho's IPO structure has been seen as conservative, especially with a significantly reduced Offer for Sale (OFS). The OFS has been cut by nearly 40% from the initial plan, indicating that existing investors would rather stay invested than cash out. This move further highlights the confidence in Meesho's market position and growth potential.
Valuation analysis
Meesho's IPO valuation shows modest premium
Meesho's last primary fundraise in September 2021 pegged its valuation at $4.9 billion. The current IPO suggests a valuation of about $5.8 billion, which is a 19% premium. This is relatively modest compared to the steep uplifts seen in earlier tech listings, indicating that Meesho has not positioned its valuation too aggressively.
Market comparison
Meesho's unique market position and financial performance
Meesho's unique combination of user scale, low Average Order Value (AOV), asset-light fulfillment, and Net Market Value-linked economics makes it hard to compare with other consumer-tech companies like Zomato or Nykaa. The company posted a GMV of ₹701.6 billion over the last 12 months but revenue figures are not directly comparable as peers disclose revenue instead of GMV.
Financial outlook
Meesho's financial metrics and future prospects
Despite scale pressures, Meesho has improved multiple operating metrics. Its contribution margin rose from 2.9% in FY23 to 4.95% in FY25, while customer acquisition costs have dropped over three years. The company generated positive free cash flow of ₹351 crore in FY25, indicating a positive trend toward sustainable profitability.
Profitability concerns
Meesho's adjusted EBITDA margin and future challenges
Meesho reported an adjusted EBITDA margin of -0.39%, after adjusting for ESOP charges, share-based payments, and one-time restructuring costs. Despite losses widening to ₹460 crore in FY25 due to a one-time tax expense related to a business combination, analysts remain optimistic about Meesho's operating performance. However, they have raised concerns over its heavy reliance on cash-on-delivery services and limited logistics partners.