Can Meesho turn its massive reach into real profits? Its IPO will tell

Its ₹5,421 crore initial public offering, or IPO, opening Wednesday, is built around a large ₹4,250 crore fresh issue and a sharply reduced offer for sale (OFS), trimmed by nearly 40% from, from 11.8 millions shares to 16 million shares. Early investors have pared back their exits, but founders Vidit Aatrey and Sanjeev Kumar have increased theirs, from ₹6.7 crore to ₹15.2 crore each a move that hints at both liquidity needs and belief in the business they are about to list. Beyond the numbers, the IPO proceeds mark the start of Meesho’s next phase of rebuilding and expansion. Reshape and rebuild Meesho plans to deploy the fresh capital into strengthening its technology backbone, expanding cloud infrastructure, funding salaries across its artificial intelligence (AI), machine learning (ML), and technology teams, and investing in marketing through Meesho Technologies Pvt. Ltd. A portion is earmarked for acquisitions and other strategic bets. That push comes after a sweeping reorganization. Originally incorporated in 2015 as FashNear Technologies Pvt. Ltd, Meesho adopted its present name only in May 2025. A National Company Law Tribunal-approved restructuring split the business into two core verticals, Meesho Technologies (MTPL) for the marketplace and Meesho Grocery (MGPL) for grocery, while fully absorbing its long-standing US parent, Meesho Inc. The overhaul eliminated years of cross-border complexity, separated high-burn units from the core marketplace, and tightened reporting and governance in preparation for a public listing. The low-AOV flywheel A turning point came in 2021, when Meesho shifted to a zero-commission model for unbranded sellers. The move triggered a flywheel of low-price, high-frequency orders and eventually helped Meesho build what it claims is India’s largest base of transacting customers and highest order volume. In the 12 months ended September, 230 million Indians bought at least one product on the platform, according to its prospectus. The momentum has been fuelled by consistently falling AOVs. From ₹336.71 in FY23 to ₹298.36 in FY24 and ₹274.27 in FY25, AOV dropped further to ₹265.50 in the first half of FY26, cementing Meesho as the lowest-AOV major e-commerce player. While prices shrank, volume took off: orders grew at a CAGR of 33.82% over the past three fiscals. “Our ability to continually reduce the cost for sellers and in turn enabling them to reduce prices of their products on Meesho is in part reflected in the reducing Average Order Value (AOV) on Meesho," the red herring prospectus (RHP) highlighted. While the AOV has decreased, the number of placed orders has grown at a CAGR of 33.82% in the last three fiscals. Meesho now leads in Fashion and Home & Kitchen by order volume and ranks among the top three in Beauty and Personal Care. Its other growth levers include advertising and logistics. “Our monetisation model is built on two levers—a logistics markup and advertising—and neither depends on AOV," co-founder and CEO, Vidit Aatrey told Mint. “What really matters is net merchandise value (NMV)." He highlighted that Meesho’s evolution mirrors large players in Southeast Asia and Latin America, where advertising drives the bulk of revenue despite zero platform fees. Perumal Raja K J, equity research-associate director at FundsIndia, agrees that the zero-commission model enables Meesho to deliver low-cost fulfilment and stick to its value-commerce identity without needing deep discounts. Logistics muscle The company’s operating backbone is Valmo, Meesho’s asset-light logistics network that now handles 65% of shipped orders. In FY25, orders grew 37%, NMV approached ₹30,000 crore, and Meesho generated ₹600 crore in free cash flow, close to ₹1,000 crore when interest income is included. It also claims the highest GMV per employee among listed peers, according to the prospectus. “We’ve consistently shown how our logistics costs have come down," co-founder and CTO Sanjeev Kumar told Mint, noting that Valmo’s model taps underutilized logistics capacity, much like ride-hailing platforms that operate without owning cabs. Aatrey added that a Valmo order is “1-11% cheaper" than a comparable third-party partner shipment, and that AI-driven improvements to address accuracy and fraud control continue to bring down delivery failures and return to origin (RTOs). User growth and commerce activity have accelerated alongside these efficiency gains. Annual transacting users grew from 136 million in FY23 to 199 million in FY25, driving gross merchandise value (GMV) from ₹34,491 crore to ₹50,312 crore and net merchandise value (NMV) from ₹19,233 crore to ₹29,988 crore. “Meesho’s recent free-cash-flow strength largely comes from its asset-light setup, tighter cost control, and steadily improving logistics economics, especially as order volumes increase," said Ratiraj Tibrewal, director, Choice Capital. “Its strong growth in orders and NMV is driven by deep penetration in value-focused markets, frequent low-ticket purchases, and a large base of small sellers." He noted that this allows Meesho to scale without leaning too heavily on discounts, though margins remain thin and sensitive to logistics costs, returns and competition. “Sustained profitability will depend on stronger monetisation through ads and seller services." The CoD knot Cash-on-delivery (CoD) remains deeply embedded in Meesho’s customer behaviour. It accounted for 89% of shipped orders in FY23, 85.4% in FY24, 77% in FY25, and 72% in Q1 FY26. While gradually declining, CoD levels remain well above broader industry norms, and the reliance is costly: high CoD drives returns to origin (RTO), with reverse logistics hitting margins. Return rates have stayed steady at 7.5-8%. Aatrey, however, argues that CoD remains a strength rather than a deficiency. “Three or four years ago, 95% of our orders were cash-on-delivery. Today that number is around 70% and consistently declining," he said, adding that CoD remains crucial for acquiring new users. The company charges a CoD fee and has launched BNPL options to accelerate prepaid adoption. “Meesho’s high CoD mix and ~8% return rate largely reflect its Tier-2+ customer base, where cash remains dominant and digital adoption is still catching up, alongside its low-AOV product profile. Returns are still modest relative to broader e-commerce benchmarks, and CoD remains critical for driving demand. With better fraud controls, prepayment incentives and improved fulfilment via Valmo, these metrics should gradually improve. They warrant monitoring, but we don’t see them as a structural concern at this stage," Raja noted. New verticals, new risks Not all lines are headed in Meesho’s favour. Losses at Meesho Payments Pvt. Ltd widened from ₹0.9 crore in FY23 to ₹26 crore in FY25, with another ₹13.4 crore lost in the first half of FY26. Meesho Grocery swung from a ₹79.3 crore profit in FY25 to a ₹29.4 crore loss in the first half of FY26. The company has also exited China, Indonesia and the US over the past two years. Despite these setbacks, analysts point to the company’s robust operating discipline. “Meesho’s strong working-capital discipline—marked by short receivable cycles and favourable payable terms with logistics partners and sellers—ensures minimal cash gets locked up in day-to-day operations. These factors have been pivotal in driving consistent free cash flow and highlight the capital efficiency at the core of its business model," said Prashanth Tapse, senior vice president -research, Mehta Equities. While Meesho is strongly free-cash-flow positive, its Ebitda has remained negative for four consecutive reporting periods. “Marketplace Ebitda staying negative even at high GMV highlights the limits of the zero-commission model—Meesho can turn profitable, but the path is narrow and execution-heavy," said Tibrewal. The company booked a large tax expense of ₹2,486 crore that reflects a one-time restructuring. Also Meesho faces intense pressure from giants like Amazon and Flipkart, whose superior logistics, stronger brands and higher-margin categories overshadow its low-AOV model. Even smaller value-commerce rivals such as GlowRoad and Shop101 mirror its strategy, raising the risk that Meesho’s zero-commission edge may erode as competition deepens. Macro tailwinds Still, Meesho rides powerful structural trends. The broader retail market is projected to swell from ₹83 trillion this year to a staggering ₹123-135 trillion by FY30, according to the RHP. Even more critical is the e-commerce segment, which is expanding at a breakneck 20-25% annual rate, on track to hit ₹15-18 trillion by FY30. Positioned strategically for vast non-metro penetration and rising digital adoption, Meesho is poised to capture the heart of India’s fastest-growing consumer internet opportunity.