WestBridge Capital eyes stake in Meesho via secondary transaction

In a secondary transaction an investor buys a stake in a firm from an existing backer and the money doesn’t go into the company’s coffers.

WestBridge Capital is in talks to buy a stake in Meesho through a secondary transaction, people aware of the matter told Moneycontrol. The VC firm, which also invested money in Third Wave Coffee earlier this week, is now eyeing a 1-2 percent stake in the e-commerce company, the people, requesting anonymity, added.

In a secondary transaction an investor buys stake in a firm from an existing backer so the money doesn’t go into the company’s coffers. Most secondary transactions typically happen at a discount of about 25-30 percent from the company’s previous valuation.

In the current transaction, WestBridge is looking to buy a 1-2 percent stake in Meesho from Venture Highway at a valuation of around $3-3.5 billion, or about 40 percent lower than what Meesho commanded during its last fundraise. The Bengaluru-based company had last raised $570 million at a valuation of $4.9 billion in September 2021.

Meesho, WestBridge Capital and Venture Highway did not immediately respond to Moneycontrol's emails.

If the deal goes through, Venture Highway could be making a handsome exit since it first backed the company seven years ago and has participated in several follow on rounds after.

The VC firm had invested around $100,000 at a valuation of around $1 million when it first backed Meesho in its seed round in 2016, according to Tracxn, a private markets data provider.

TechCrunch reported the development first and said Venture Highway’s 5 percent stake in Meesho is now worth around $250 million. The transaction comes at a time when Meesho said it turned profitable on a PAT basis in the month of July.

In FY22 Meesho recorded losses of around Rs 3,251 crore on a revenue of nearly Rs 3,232 crore in FY22. Its financial health had improved in FY23, CFO Dhiresh Bansal had said earlier. Meesho’s revenues grew by around 60 percent on a YoY basis while its losses narrowed by 50 percent in FY23, when compared with FY22, Bansal said. To be sure, the company’s accounting books are still being audited.