If you’re keeping up with the news about the Indian IPO market, you would be aware of Meesho.
After the public issue of the company was oversubscribed 79 times, the stock made a big bang debut on Dalal Street last week, on 10 December, listing at a 46% premium over its issue price of Rs 111.
On listing day, the stock jumped to over Rs 170 intraday as speculation ran rampant and investors who did not receive allotment in the IPO bought shares from the open market.
But it seems the rise hasn’t ended. The stock price soared to a new high of Rs 193.5 today, 16 December, on the BSE.
At such moments, it’s important to not get swayed by emotions, look at the fundamentals of the business, and only then consider taking a decision.
In this editorial, we will look at the pros and cons of investing in Meesho.
Pros
#1 Well established ‘small city’ business
Meesho has a very strong pressence tier-2 and tier-3 cities in India. Close to 90% of the company’s orders come from these cities.
As per Redseer, the company is India’s largest ecommerce platform by Annual Transacting Users (ATUs) for the 12-month period ending September 2025, due to heavy adoption in tier 2 and smaller regions.
The company has made a name for itself by successfully competing against giants like Amazon and Flipkart in India’s non-metro cites. In fact, it could be argued that Meesho winning the battle against these big firms in tier-2 and tier-3 cities.
Meesho’s sellers include manufacturers, wholesalers, and traders, while consumers span many income groups but are mainly value-conscious shoppers looking for affordable products.
In FY25, the company had 198.77 million (m) annual transacting users, with 174.43 m from outside India’s top 8 cities. Women made up a large portion of its users, around 54%.
The company follows a differentiated business model compared to its much larger peers. Shoppers in smaller cities make small sized but more frequent orders. This results in a relatively small value per order but a much higher order frequency.
To fully establish itself in small cities, the company follows a ‘zero-commission for sellers’ and ‘zero platform fees for buyers’ business model.
Meesho relies on everyday low prices to attract customers. To generate revenue, it provides logistics, market insights, and fulfilment services to sellers. The business also generates advertising revenue.
Most importantly, the company does not indulge in deep discounting that is at the heart of the business model of ecommerce giants.
#2 IPO funds to fuel growth
The net proceeds from the fresh issue of the IPO will be invested in…
- Cloud infrastructure
- Marketing campaigns
- Acquisitions
- Other strategic initiatives
The IPO funds from the fresh issue is expected to strengthen its marketplace had provide better services to both buyers and sellers.
Cons
Profitability
There is only one big negative that we can highlight here. The business is still making losses which means any potential investor will have to exercise caution.
Meesho’s consolidated revenue grew from Rs 57,345.2 m in FY23 to Rs 93,899 m in FY25, because of strong growth in placed orders and rising monetisation from fulfilment and advertising services.
The company’s profitability improved from FY23 to FY25, with operating loss narrowing from Rs 16,719 m to Rs 1,084 m as the company gained scale, kept advertising and employee costs under control, and improved logistics efficiency through its Valmo initiative.
However, profitability weakened in the first half of FY26, with operating loss widening to Rs 4,332 m due to higher marketing spends, increased technology costs, and rising logistics payouts.
Net losses remained elevated in FY25 and the first half of FY26 because of large exceptional expenses, including one-time tax costs, ESOP-related charges, and a vendor dispute settlement.
The company did turn free cash flow positive in FY25. However, it remains to be seen if the company can maintain this going forward.
Meesho’s Financials
| (Rs m) | FY23 | FY24 | FY25 | H1FY26 |
| Revenue | 57,345.2 | 76,151.5 | 93,899.0 | 55,775.4 |
| Operating Profit | -16,719.0 | -3,145.3 | -1,084.3 | -4,332.1 |
| Net Profit | -16,719.0 | -3,276.4 | -39,417.1 | -7,007.2 |
Source: Company FY25 Report and RHP Filings
Conclusion
Meesho is a differentiated and rapidly scaling business in India’s evolving e-commerce landscape. The company’s platform has strong growth drivers, along with a unique business model.
However, risks to profitability is meaningful and investors must evaluate this aspect of the company carefully. It’s not clear how long the company will need to establish sustainable profitability.
Investors should evaluate the company’s fundamentals, corporate governance, and valuations of the stock as key factors when conducting due diligence before making investment decisions.
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