Meesho rides high on e-commerce boom in non-metros

Bengaluru: Last month, Bengaluru-headquartered e-commerce company Meesho made a strong stock market debut with its shares listing at Rs 161.20 on the BSE, a premium of over 45% over the IPO price of Rs 111.

Earlier, its IPO (Initial Public Offering) ended with a total subscription of 79 times, which according to brokerage firms, was one of the highest subscription figures among large-scale new-age stock listings in recent years. What are the key factors behind this strong performance?

Analysts attribute this performance to SoftBank-backed Meesho’s asset-light model and penetration in tier-2,3 and 4 markets. The value-focused e-commerce marketplace serves consumers from diverse income backgrounds. “This is made possible by providing a low-cost channel for sellers, which in turn allows them to offer a wide assortment of products at affordable prices to consumers,” the company stated in its Draft Red Herring Prospectus (DRHP). The company monetises through services that are provided to sellers such as order fulfilment, advertising and data insights.

“Meesho’s growth in tier 2 and 3 markets comes from solving very real, everyday problems — price sensitivity, limited brand access, and comfort with local languages. Its low-cost assortment, simple app experience, and strong word-of-mouth through social sharing have helped it penetrate households that were earlier hesitant about e-commerce. From a marketing lens, Meesho has positioned itself less as a ‘platform’ and more as a familiar shopping habit, which works strongly in non-metro India,” Media Care Brand Solutions Director Yasin Hamidani said.

Unlike large e-commerce players that focus on selection depth and premium branding, Meesho operates on affordability, relatability, and community-driven discovery, Hamidani added.

InGovern Research Services Founder and MD Shriram Subramanian said, “Sellers of these companies (Amazon, Flipkart) address well-heeled customers who care about brands, quality, return logistics and are discerning. Amazon and Flipkart also provide a fulfilment basis for sellers where inventories are at the warehouses and orders are fulfilled quickly. The per order ticket size on Amazon or Flipkart will be much higher than the average order ticket size on Meesho."

According to the Redseer report, the country’s e-commerce market is currently sized at Rs 6 lakh crore in gross merchandise value (GMV), and the report projects it to reach Rs 15-18 lakh crore by fiscal 2030. It forecasts that the majority of new online shoppers will come from tier 2+ cities, which are projected to account for 51-52% of the country’s e-commerce market by 2030.

Focus on AI/ML

The company said every interaction between its stakeholders on its platform generates rich data inputs, which are continuously fed into Artificial Intelligence/Machine Learning models. Of its total net proceeds, it also plans to use it to its existing and replacement hires for ML and AI & technology teams for AI and technology development undertaken by MTPL (Meesho Technologies Private Limited).

During the company’s IPO press conference, Meesho Co-founder and Chairman Vidit Aatrey had said there were 234 million annual transacting users and 7,06,000 annual transacting sellers on its platform. The e-commerce platform has over 50,000 active content creators. In fiscal 2025, 198.77 million annual transacting users transacted on Meesho, of which 174.43 million were from outside the top 8 cities in India.

The company has reduced its Average Order Value (AOV) from Rs 336.71 in fiscal 2023, Rs 298.36 in fiscal 2024 to Rs 274.27 in fiscal 2025, and was Rs 269.36 in the three months period ended June 30, 2025.

Analysts who track e-commerce companies also pointed out the platform’s low customer acquisition costs and asset-light operations. The company does not manufacture or sell private label products, own product inventory or logistics infrastructure, thus, these factors make it more capital-efficient compared to other e-commerce models that may depend on physical stores, warehousing, owned inventory and/or captive logistics.

Meesho’s GMV grew to Rs 50,361 crore as of March 31, 2025, from Rs 34,504 crore in fiscal 2023.

GMV is the total value of placed orders by consumers on the marketplace. According to a recent report by brokerage firm CLSA, Meesho is expected to increase its share of the country’s ecommerce market from 8.5% to 10% by FY30.

Though the company is gaining market share, will it be able to sustain the same?  Hamidani said that sustainability will depend on maintaining quality, improving delivery experience, and managing seller standards as volumes grow. “If Meesho can evolve its brand trust without losing affordability, it has a strong chance of sustaining growth in India’s next wave of digital consumers,” he added.