SoftBank Backs Meesho's $606M IPO - India's First Major E-commerce Listing

Meesho Prepares for $606 Million IPO

Meesho, a significant competitor to Amazon and Flipkart in the Indian e-commerce sector, is preparing to launch an initial public offering (IPO) valued at approximately $606 million. This offering is characterized by share sales from early investors, while major shareholders like SoftBank and Prosus are not participating in selling shares.

IPO Details and Valuation

The startup intends to price its shares between ₹105 and ₹111, aiming to raise ₹42.50 billion (roughly $475 million) in new capital, alongside a smaller amount from secondary sales. This will result in a post-issue valuation of around ₹501 billion (approximately $5.60 billion) for Meesho.

Previously, Meesho was valued at around $5 billion in private markets back in 2021.

First Major Horizontal E-commerce IPO in India

Meesho is poised to be the first major horizontal e-commerce platform in India to go public. Rival Flipkart is anticipated to follow suit with an IPO next year, and Amazon is reportedly considering a potential spin-off of its Indian operations for a possible future listing.

Shareholder Activity in the IPO

Several early investors are utilizing the IPO to reduce their holdings. Elevation Capital is offloading slightly over 4% of its stake, while Sequoia Capital spin-off Peak XV Partners is selling around 3%, and Y Combinator is trimming approximately 14%, as detailed in the prospectus.

Notably, larger investors, including SoftBank, Prosus, and Fidelity, are retaining their shares and not participating in the sale.

Changes to the Offer-for-Sale

The offer-for-sale component of the IPO has been reduced by about 40% from the initial draft prospectus, now totaling 105.5 million shares, valued at ₹11.7 billion (roughly $131 million) at the upper end of the price range.

However, the co-founders, Vidit Aatrey and Sanjeev Kumar, are now offering more shares than originally planned, increasing their combined offer to 32 million shares from approximately 23.5 million, offsetting the reduced participation from other shareholders.

Meesho's Evolution and Business Model

Established in 2015, Meesho initially functioned as a social commerce platform, targeting first-time online shoppers through WhatsApp. It has since transformed into a comprehensive marketplace.

The company has successfully established a strong position with a low-cost model designed for India’s cost-conscious consumers and small merchants, creating increasing pressure on larger competitors like Amazon and Flipkart.

Meesho operates on a commission-light model, generating revenue primarily from logistics fees, advertising, and other services, while applying commissions to products sold through its dedicated Meesho Mall channel.

Financial Performance

Meesho reported revenue from operations of ₹55.78 billion (about $624.0 million) for the six months ending September 30, an increase from ₹43.11 billion (around $482.0 million) in the same period last year, according to its prospectus.

Net merchandise value experienced a 44% year-over-year increase, reaching ₹191.94 billion (roughly $2.15 billion). However, losses widened, with Meesho reporting a restated loss before tax of ₹4.33 billion (around $48.4 million) for the September 2023 half-year, compared to ₹0.24 billion (about $2.7 million) the previous year.

User and Seller Base

Over the past 12 months, Meesho has recorded 234.20 million transacting users – unique consumers who made at least one purchase on the platform.

During the same period, the company had 706,471 annual transacting sellers, defined as those who received at least one order during the year.

Creator Network

Meesho leverages a substantial creator network for product discovery, with over 50,000 active content creators generating at least one confirmed order through their content in the last year.

Investor Confidence

Mohit Bhatnagar, managing director at Peak XV Partners, expressed strong confidence in Meesho’s long-term potential, stating that many Indians are first experiencing e-commerce through the platform and will increasingly rely on it for their online shopping needs.

Peak XV, which initially invested in Meesho in 2018, is selling around 17.38 million shares in the IPO.

Positioning and Competitive Landscape

Meesho has strategically positioned itself as a value-focused platform, differentiating itself from Amazon and Flipkart, which are perceived as convenience-driven players. The company draws parallels with other value-driven marketplaces like Pinduoduo in China, Shopee in Southeast Asia, and Mercado Libre in Latin America.

According to Meesho co-founder Vidit Aatrey, the platform appeals to mass-market consumers by offering a wide selection of products at affordable prices.

Impact of the IPO

Meesho anticipates that the IPO will enhance its ability to attract top talent and bolster confidence within its broader ecosystem, according to CFO Dhiresh Bansal.

A public listing is expected to strengthen the company’s brand image among potential employees, including those from established Big Tech firms, and positively influence consumers, sellers, and logistics partners by reinforcing Meesho’s governance standards.

Subscription Details

The IPO will open for public subscription on December 3, with the anchor book scheduled for December 2. Approximately 75% of the offer is allocated to qualified institutional buyers, 10% to retail investors, and 15% to non-institutional investors.

SoftBank did not provide a response to a request for comment.