Meesho management outlines path to profitability, growth strategy, and new revenue streams

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Meesho IPO

As its IPO opened today, Meesho's top management detailed the company's strategy for achieving sustainable profitability, focusing on free cash flow, user growth, and the development of new high-margin revenue streams. In an interview with CNBC TV18, Vidit Aatrey, CMD and CEO, alongside Dhiresh Bansal, CFO, provided insights into the e-commerce platform's financial health and future trajectory.

Aatrey emphasised that free cash flow (FCF) is the company's primary bottom-line metric. "(For) Any company, textbook definition of valuation is the net present value of your all your future cash flows," he stated, highlighting Meesho's capital-efficient and asset-light model. He noted that the company generated almost ₹1,000 crores of cash in the last financial year (FY25), and expects this trend to continue. "If the business is generating cash consistently getting bigger and bigger, there's no chance that the shareholders get diluted again," Aatrey added, underscoring the long-term value creation strategy.

Addressing concerns about significant planned expenditures, CFO Dhiresh Bansal clarified the use of IPO proceeds. He explained that planned spends of nearly ₹1,400 crores on cloud infrastructure and over ₹400 crores on tech talent are projected for the next three years. Crucially, these are operational expenses already factored into the profit and loss (P&L) statement and not capitalized. "Operating leverage is a key metric that we would kind of keep tracking," Bansal said, pointing out that server costs grew by only 4.5% while the company's top line grew by about 35%, a trend they aim to maintain. He also clarified that the adjusted EBITDA loss for the first half would be closer to ₹500 crores, not ₹700 crores.

Regarding growth drivers, the management pointed to a dual strategy of expanding the user base and increasing order frequency. The annual transacting user base growth accelerated from 14% in FY24 to 28% in FY25, and further to 35% in the first half of the current year, reaching over 23 crore users. Simultaneously, order frequency has increased from 7.5 times two years ago to nearly 10 times. While this has led to a decline in the average order value (AOV), Bansal views this positively. He suggested AOV might decline further, which is "a beneficial thing to have because that means that people are transacting in a lot many more price points than they were before."

Looking ahead, Aatrey revealed plans for significant revenue diversification. Beyond the current core streams of logistics and advertising, which are expected to grow exponentially, Meesho is investing in new verticals. These include a content commerce platform and a financial services platform. Aatrey drew parallels with major value commerce players in China and Latin America, which derive substantial profits from financial services. "All of these are very high-margin revenue streams," he noted, indicating that their contribution will flow directly to the bottom line, reinforcing the company's path to consistent profitability.