Meesho may raise nearly twice the money it wanted to

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Several venture capital (VC) firms are lining up to participate in Meesho’s ongoing round, multiple sources aware of the developments told Moneycontrol. Since March 26, when Moneycontrol reported that the company is lining up $300 million from Tiger Global, Peak XV Partners, SoftBank and other investors, at least four other people have said that the homegrown e-commerce platform is likely to increase the round size and raise a total of around $500-650 million.

Of the total amount, the primary capital of around $300 million will be used to pay off taxes that arise from flipping the company’s base back to India from Delaware and the remaining will be the secondary component.

“The talks are still on and which investor dilutes how much will determine the final round size but a total of $500 million looks likely,” one of the people cited above told Moneycontrol.

In the past months Meesho even engaged with Accel. Talks between the investor and the company have however not fructified, two people cited above told Moneycontrol. Interestingly, Accel was an early backer of Flipkart – Meesho’s arch rival. This is the second instance where an early backer of Flipkart has shown interest in Meesho. Tiger Global, which is preparing to cut a cheque for Meesho in the ongoing round, was the other one.

While Tiger Global and Peak XV are leading the ongoing round. SoftBank, WestBridge Capital, Singapore-based Mars Growth Capital are the others participating in the round as reported by Moneycontrol earlier. Venture Highway and Meta (formerly Facebook) are among the early backers diluting their stake.

The round values Meesho at $3.9 billion, 20 percent lower than $4.9 billion valuation it commanded during its previous fundraise in 2021. The reduction in value comes after Fidelity cut Meesho’s valuation to $3 billion, Moneycontrol reported in January.

Accel and Meesho did not reply to Moneycontrol’s emails seeking details.

Strategic timing

The fresh fundraise also comes at a time when Meesho is also looking to acquire companies that complement its business. The startup wants to expand its customer base and is working on having a presence in several categories, from groceries to electronics. It has, however, not identified potential targets yet.

“We keep scouting for opportunities where we can enhance either our category play or add some capabilities to our business,” Meesho’s CFO Dhiresh Bansal had told Moneycontrol last year when it turned profitable.

Founded by Vidit Aatrey and Sanjeev Barnwal in 2015, Meesho reported a monthly profit of Rs 4-5 crore in July 2023 and has largely remained profitable since then.

The turnaround in performance was after the company had already shown an improvement in FY23. In the previous fiscal year, Meesho halved its losses to Rs 1,675 crore from Rs 3,251 crore in FY22. At the same time, the company said its revenue from operations grew 77 percent from Rs 3,232 crore in FY22 to Rs 5,735 crore in FY23, as existing customers transacted more on the platform and monetisation efforts yielded desired results during the year.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow