The Meesho share price has cooled off after almost doubling from its listing price. But is there more steam left? UBS has initiated coverage on Meesho with a ‘Buy’ rating and a target price of Rs 220, implying an upside of about 29% current levels. Though the share price has moved well above the UBS target, here is a detailed analysis of the key factors fuelling the growth As per UBS Research, Meesho’s focus on lower / middle income consumers in India’s Tier 2 and 3 cities provides a growth runway as online adoption accelerates among these consumers. Unlike other internet businesses in India, UBS believes “the company’s asset-light, negative working capital business model has also ensured positive cash flows.”
UBS pointed out that Meesho now accounts for around 25% of India’s monthly active users, with close to 90% of its base coming from Tier 2 cities and beyond. The bigger surprise sits in how cash flows through the system. According to the report, Meesho operated with a negative working capital cycle of about 24 days in FY25. It collects money from buyers first and pays sellers and logistics partners 8–20 days later. This structure helped Meesho generate about Rs 1,000 crore in free cash flow to equity in FY25, even though it remains loss-making on paper. In practical terms, the ecosystem itself is funding growth.
#1. UBS on Meesho logistics: Cost today, margin tomorrow
Another aspect where Meesho operates different rom other internet based buisness peers is handling shipping cost – UBS noted that the company does not subsidise logistics costs and instead passes them on to merchants with a 2–3% premium.
The economics are moving in Meesho’s favour. Delivery costs have already declined from Rs 55 per order in FY23 to Rs 46 in FY25, driven by its in-house logistics platform, Valmo. UBS expects this number to fall further to about Rs 34 per order by FY30. As costs decline, the premium charged to sellers does not shrink. It becomes a margin buffer. According to UBS, Meesho increasingly looks like a logistics coordinator whose efficiency improves with scale rather than a retailer dependent on discounts.
#2: UBSon Meesho advertising: Margin engine already at work
Fintech draws attention, but UBS is clear that advertising is the first real driver of profitability. The report stated that ad revenue already contributes about 2.5–3% of NMV and is expected to rise to nearly 5% by FY30.
This alone pushes contribution margins from 4.9% in FY25 to about 6.8% by FY30, as per UBS estimates. The key point is simple. Meesho does not need new businesses to reach operating balance. The core marketplace, supported by advertising, is already carrying the margin load.
#3: UBS explains why Meesho makes cash before profits
UBS repeatedly stresses that Meesho’s unit economics are already different from peers. Contribution margin stood at 4.9% in FY25, while several competitors remained contribution-negative until they reached far higher order volumes.
Cash flow reflects this difference. UBS estimates free cash flow to equity of Rs 430 crore in FY24, rising to Rs 1,007 crore in FY25, Rs 1,600 crore by FY27, and about Rs 3,850 crore by FY30. This is driven by low capital needs and the same negative working capital cycle. Profits arrive later. Cash arrives first.
#4: UBS flags Meesho fintech as upside, not the base case
Fintech appears in the UBS report as an optional upside rather than a core assumption. For context, UBS pointed to Shopee, whose loan book reached about US$7.9 billion and delivered an EBITDA margin of around 13%.
Meesho’s starting point is different but large. The platform has data from 234 million transacting users and over 7 lakh sellers. As outlined by UBS, products such as Meesho Instant Cash and Meesho Pay Later are designed to bridge credit gaps for users and sellers that banks often avoid. The company works with NBFC partners, keeping lending off its own balance sheet. UBS views the real value in building credit profiles for a population that remains largely outside formal finance.
#5: UBS on how Meesho owns the middle of India
While quick-commerce players focus on the top income decile, UBS notes that Meesho dominates a different segment. About 90% of its users come from Tier 2 cities and smaller towns. Based on UBS’s income analysis, these households spend roughly 30–32% of their income on apparel and household goods.
Growth here comes from behaviour rather than pricing. UBS models annual order frequency rising from 9.2 orders in FY25 to 14.7 by FY30, supporting a 30% CAGR in NMV. By comparison, UBS notes that several rivals already draw 75–80% of their value from the top eight cities, where growth is far harder to sustain.
Another trend UBS highlighted is the current trend where cash-on-delivery is seeing a steady decline. COD orders have fallen from over 90% in FY23 to about 61% in H1 FY26. A higher share of prepaid orders lowers failed deliveries, reduces returns, and smoothens cash flows. This improves margins without adding a new revenue stream.