Softbank-backed e-commerce unicorn Meesho has announced its second round of job cuts in just over a year, leading to the termination of 251 employees, which represents around 15 percent of its workforce.
In an email dated May 5, co-founder and CEO Vidit Aatrey informed the company's staff about the decision, citing a challenging macroeconomic environment. Moneycontrol has reviewed a copy of the email.
The Bengaluru-based company, which was among the first few new-age companies to slash jobs in a tough funding environment, had last year let go of 250 employees from its grocery arm, which was rebranded to Superstore from Farmiso. The latest round is however the first one at Meesho's marketplace model, its core business.
"As leaders, we made judgement errors in over-hiring ahead of the curve. At the same time, we could have run our org structure in a more effective and lean manner overall," Aatrey said in his email.
"Our spans and layers were inflated, and this could have unintended consequences on our speed to execute. While we are confident that Meesho business will stay strong, the economic reality is here to stay. We are now faced with the hard truth of aligning our people costs with the new projections for our business. We should have done better here," he added.
The employees impacted by the recent decision will receive an email in the next 60 minutes, letting them know about the status of their employment with the company. Then, meeting links will be shared personally to facilitate one on one conversations between the staff members and their managers, according to the email. Outgoing workers will, however, have access to Gmail and Slack channels till Sunday evening.
“We have taken a difficult decision to part ways with 251 Meeshoites, constituting 15 percent of the employee base, as we look to work with a leaner organisational structure to achieve sustained profitability,” a spokesperson for Meesho confirmed.
“We are committed to ensuring all those impacted have our full support and will be provided a separation package that includes a one-time severance payment of 2.5 to 9 months (depending on tenor and designation), continued insurance benefits, job placement support and accelerated vesting of ESOPs. We remain grateful for their contributions in building Meesho.”
As part of the package to outgoing employees, employees will receive full pay for their notice period and an additional one month, along with a tenure-based payment of 15 days pay for every completed year of service, rounded up to the nearest year, as per the email. The company said it will also extend family insurance coverage till March 31, 2024. And will relax ESOP vesting norms so the departing employees remain shareholders in the company.
Along with the reduction in headcount, Meesho has also lowered its cloud expenses down by 50 percent, as reported earlier. In fact, in December last year Meesho had cut its monthly cash burn by 90% to around $4 million, the company's Chief Financial Officer, Dhiresh Bansal had told Moneycontrol in an interview in December last year.
According to analysts at Jefferies who interacted with the management, Meesho is nearing zero cash burn and is targeting to achieve EBITDA breakeven over the course of CY23 and has a cash buffer of around $400 million.
"While our cash reserves buffer us well for these harsh circumstances, we need to stay highly prudent on the cost front," Aatrey's mail on May 5 said.
Meesho has so far raised over $1 billion and is valued at $4.9 billion, according to data from Tracxn. The analysts at Jefferies said it is India's leading e-commerce platform with gross merchandise value (GMV) of about $4.5 billion and enjoys a 7% share, in a market where giants like Walmart's Flipkart and Amazon also operate. However, Meesho is "growing well ahead of the market," the Jefferies note said.
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