Meesho Plans Credit & Grocery Route To Take Over Flipkart

SUMMARY

Meesho intends to foray into financial services by establishing a credit marketplace, which acts as an intermediary for lending partners including banks and non-banking financial companies (NBFCs)

Meesho, similar to its peers in the online commerce industry, aims to diversify its offerings to enhance profitability

Meesho claims to have achieved profitability in the Q2 of FY24

Ecommerce unicorn Meesho, which counts SoftBank, Peak XV, Fidelity Investments, Prosus & Naspers and Meta as among its marquee investors, is mulling to build a financial services platform and grow its grocery delivery business in the upcoming financial year.

This comes days after angel investors and early institutional shareholders of Meesho are reportedly in talks with potential investors to divest their stake. WestBridge Capital and Norwest Venture Partners are reportedly among the investment firms engaging in talks with the ecommerce startup’s early investors.

According to ET’s report, Meesho intends to foray into financial services by establishing a credit marketplace, which acts as an intermediary for lending partners including banks and non-banking financial companies (NBFCs). The company will earn a commission on each transaction.

Meesho also outlined that the financial services and grocery initiatives are part of the company’s diverse business endeavours. The company has recognised challenges in accessing credit lines and it intends to provide sellers faster access to payments. This will enable support for small businesses by enabling financial inclusion, the report added.

The company is also reportedly actively looking for a senior executive to lead its lending function and is working on establishing an in-house credit risk and data science team.

Initially focusing on merchant loans, Meesho plans to extend lending services to consumers, particularly in non-metro areas, where the average selling price of products on its platform is below INR 500.

Founded in 2015 by Vidit Aatrey and Sanjeev Barnwal, Meesho once hailed as the poster child of social ecommerce, made a strategic pivot in 2022 to become a marketplace. This move places the company in direct competition with industry giants such as Flipkart and Amazon. The company is best poised to disrupt the duopoly of Amazon and Walmart-owned Flipkart, as per analysts.

Last year, Meesho implemented a significant reduction in its workforce by 15%, optimising for a leaner organizational structure.

In 2022, Meesho scaled down its grocery operations amid an internal reset. Meesho’s spokesperson told ET that the company aims to differentiate itself by not merely acting as a lead generator for lending partners but by building its credit underwriting models, decision-making systems, fraud detection, and other capabilities, aspiring to create a full stack of credit products.

Recently, Meesho also saw a markdown in its valuation with US-based asset management company Fidelity slashing its valuation to $4.1 Bn at the end of October 2023, down from $5 Bn in August last year. Meesho, founded in 2015 by Vidit Aatrey and Sanjeev Barnwal has SoftBank, Peak XV, Fidelity Investments, Prosus & Naspers and Meta among its investors.

The company reported an operating revenue of INR 5,735 Cr in FY23, a 77% increase over INR 3,232 Cr in the previous fiscal year. Fashnear Technologies, the parent entity of Meesho, reported a net loss of INR 1,675 Cr in FY23, a 48% drop from INR 3,248 Cr in the previous year. Besides, Meesho claims to have achieved profitability in the Q2 of FY24.

It is pertinent to note that Meesho is yet to file its financial statements for the financial year 2022-23 (FY23) with the Ministry of Corporate Affairs (MCA).