[What The Financials] Meesho’s Losses Surge 3X In FY20 As Social Commerce Competition Heats Up

Currently embroiled in a court case for allegedly violating ecommerce rules related to packaging information as well as a separate case for alleged fake goods sold on its platform, social commerce company Meesho has reported a staggering 3X rise in its losses for FY20, as its expenses shot up in the year.

Meesho recorded a revenue of INR 341.6 Cr in FY20, ending March 31, 2020, representing a 4X spike from the INR 84.8 Cr revenue in 2019. In the same period, the company’s expenses grew 3.5X to INR 657 Cr, leading to a loss of INR 315.4 Cr in the year, up from INR 100.42 Cr. Meesho spent INR 185.3 Cr in FY19, which is 15.8x the INR 10.97 Cr it spent in FY18.

The social commerce platform has grabbed the limelight with investors such as Elevation Capital (formerly known as SAIF Partners), Facebook and Xiaomi’s Shunwei Capital, and a network of over 2 Mn resellers and 60K wholesale partners. Meesho competes with relatively younger startups BulBul, DealShare, Mall91 and SimSim, but this is proving to be a costly affair.

Founded by IIT-Delhi graduates Vidit Aatrey and Sanjeev Barnwal, Meesho has been mired in losses since its inception in 2015. The situation remains the same in 2020 as well, with losses coming up to 92% of its revenue.

Meesho’s Shaky Foundation

About 90% (INR 306.9 Cr) of the company’s income came through its operations in FY2020, while the rest 10% (INR 34.6 Cr) came from other sources.

In terms of the expenditure, spending on transportation distribution or logistics accounted for about 38% of Meesho’s total spending in FY2020, as the company expanded to 700 towns and cities in India.

The distribution cost was followed by advertising and promotional expenses, which accounted for 33% of all spending, while employee benefits made up 16% of the company’s costs for the fiscal. Compared to FY2019, the company’s spending on transportation distribution and employees benefits grew about 3X, whereas advertising expenses grew 4.3X.

Both of these can be attributed to the rising competition in the space, where Meesho had to double down on its logistics USP and also compete with other players for the acquisition of resellers, customers and wholesalers.

Meesho also spent about INR 5.9 Cr in ‘information technology expenses’ or ‘software and technology expenses’, representing a 2.8x spike from FY2019’s INR 2.1 Cr expenses in this area.

Investors Go Big On Social Commerce In India

The Indian social commerce segment may be at a nascent stage at this point, but it is poised to grow at a compound annual growth rate (CAGR) of 55%-60% to reach $16 Bn-$20 Bn gross merchandise value (GMV) by 2025, all thanks to the growing consumer internet and social media penetration, as well as exposure to ecommerce.

Speaking to Inc42 earlier, Akarsh Shrivastava, vice-president of Elevation Capital, a venture fund that has invested in WMall, CityMall and Meesho, said, “I feel the real number is much, much larger. It is really difficult to estimate this market size, given there is a lot of unstructured commerce happening across social platforms like Facebook and WhatsApp.”

Till date, Meesho has raised $215.2 Mn across eight funding round from marquee investors like Venture Highway, Sequoia Capital, DST Partners, Prosus & Naspers, RPS Ventures and others.

The same is the case with Meesho’s competitors. BulBul has raised funding from Sequoia Surge, Sequoia India, Leo Capital, InfoEdge and others. Meanwhile, SimSim has grabbed the interest of VCs such as Good Capital, Accel India, Shunwei Capital and others.