Meesho beats Q1 revenue estimates as marketplace growth narrows loss

Meesho Ltd kicked off the June-quarter earnings season for consumer internet firms on Thursday, reporting a narrower-than-expected quarterly loss, as strong marketplace growth and improving profitability offset investments in artificial intelligence (AI), logistics and newer businesses.

The Bengaluru-based company reported consolidated revenue from operations of ₹3,712.8 crore for the quarter ended 30 June, higher than Bloomberg's consensus estimate of ₹3,601.5 crore based on seven analyst forecasts.

Consolidated net loss was ₹132.8 crore, compared with Bloomberg's estimated loss of ₹135.2 crore, as the company continued investing in growth initiatives amid intensifying competition in the e-commerce sector.

Its operating performance remained robust. Net merchandise value (NMV), the total value of successfully delivered orders placed on its platform, grew 34% year-on-year to ₹11,614 crore. Its annual transacting user base rose 29% to 274 million, while quarterly orders increased 29% to 725 million, reflecting steady customer additions and higher repeat purchases.

The number of annual transacting sellers jumped 81% to 1.04 million, supported by AI-powered tools that help merchants create product catalogues, understand demand trends and communicate with customers in regional languages.

During the earnings call, chief financial officer Dhiresh Bansal said AI is helping simplify seller onboarding through automated product classification and catalogue creation. "A lot of the attributes of what a product is automatically get populated versus a seller needing to do that, which used to be fairly time consuming and also resulted in a lot of drop-offs," he said.

Better profitability

The shareholder letter highlighted improving profitability despite continued investments. Contribution margin, a measure of earnings after direct operating costs such as logistics and payment expenses, expanded to 4.6% of NMV from 4% in the previous quarter, driven by lower logistics costs, improved monetization and fewer cancelled and returned orders.

Revenue from the marketplace business rose 48% year-on-year to ₹3,707 crore, while the marketplace's adjusted Ebitda improved to a loss of ₹139 crore from ₹198 crore in the previous quarter. The company ended the quarter with a cash balance of ₹6,521 crore.

Beyond its core marketplace, the company said Meesho Mall, its branded products platform, now hosts over 1,200 brands and recorded about 93% year-on-year growth in NMV. Its creator-led shopping business, Content Commerce, posted 141% growth in NMV, with the number of active order-generating content pieces rising to 1.7 million during the quarter.

Bansal said the company expects logistics costs to keep falling despite higher fuel prices and wage inflation. "We expect to continue to gain efficiencies... our cost per delivered order actually came down even during this quarter by about a rupee versus the previous quarter," he said. Future logistics efficiencies would largely be passed on to sellers and customers through lower prices, while advertising revenue would remain a key driver of margin expansion.

Bansal said nearly two-thirds of Meesho's gross merchandise value (GMV)-contributing sellers now advertise on the platform. "We continue to see that happening... not just new sellers becoming active on ads, but they are now using ads for more and more of their catalogues," he said.

Shares of Meesho closed at ₹188.95 apiece on the National Stock Exchange on Thursday, down 0.5% from the previous close.

Outlook

Looking ahead, the company said it expects spending on marketing and customer acquisition to increase from the second quarter as it prepares for the festive shopping season.

It also said second-quarter NMV growth may appear weaker on a year-on-year basis because its flagship Meesho Mega Blockbuster Sale has been shifted from the second quarter last year to the third quarter this year, making the comparison less meaningful.

Vidit Aatrey, founder and chief executive officer, said the company's long-term outlook remains intact. "Apart from last financial year having a higher share of sales and marketing spends, nothing else in the core business has changed," he said, adding that Meesho continues to expect around 25% compound annual NMV growth over the next five years.

On competition, Aatrey said, "Competition and intensity of competition in our sector has always been there... I would not say that the competitive intensity has changed in either direction." He said Meesho will continue to focus on improving pricing, selection and seller participation as it scales the business.

In June, Meesho agreed to acquire the community-led business-to-business commerce platform Kirana Club for about ₹202 crore in an all-cash deal, marking its entry into B2B retail. The transaction is expected to be completed in three tranches by 31 March 2027.

Aatrey said Kirana Club had created "a disruptive value proposition for kiranas across the country" by serving retailers even in small towns and rural areas. "The business is really, really small... early product-market fit, so we have to do a lot before it starts to contribute to the P&L of the company," he said.

On Meesho's grocery ambitions, Aatrey said the company is experimenting with a low-cost local logistics network because many grocery products "will be hard to ship nationally". "We believe it's quite important for the long run... but we are still in the experimentation stage," he said.

CFO Bansal said investments in new initiatives remain subject to an annual budget cap of around ₹200 crore until they achieve product-market fit.

GST treatment issue

Earlier this week, proxy advisory firm InGovern Research Services urged the Securities and Exchange Board of India (Sebi) to examine whether Meesho had adequately disclosed potential investor risks arising from the goods and services tax (GST) treatment adopted by its logistics arm, Valmo Transportation.

InGovern alleged Valmo's classification as a goods transport agency (GTA), a category that attracts different GST treatment for freight services, may have reduced its tax outgoings and improved Meesho's economics.

Responding to the issue, Bansal said Valmo Transportation aggregates first-, middle- and last-mile logistics partners and operates under a valid GTA classification under GST law following an internal restructuring.

"We had... looked at both the letter of the law as well as the spirit of the law," he said, adding that the company had obtained legal and accounting opinions before implementing the structure. Bansal said Meesho had not got any communication from Sebi or tax authorities regarding the matter. "There has been no question asked by any regulatory authority or tax authority to us on this matter... We have good reason to believe that there is no risk exposure coming out of this."