Axis Capital has initiated coverage on Meesho with a 'Buy' rating and a price target of ₹195. This target suggests a potential 34% upside from current levels. The brokerage sees Meesho as a leader in India's rapidly growing value e-commerce market, highlighting its strong market position, scale advantages, and clear growth prospects. Axis Capital projects Meesho could reach 440 million users by fiscal year 2030.
Meesho's Value E-commerce Focus
The brokerage views Meesho as well-positioned to capture a significant share of India's underpenetrated value-commerce market, especially in smaller cities and for non-electronics items where affordability is key. The company's strategy targets this segment. However, achieving this scale has come at a cost. For the fiscal year ending March 2025, Meesho reported revenue between ₹9,390 crore and ₹9,900 crore but incurred a substantial net loss of approximately ₹3,942 crore. This resulted in an adjusted EBITDA loss of around ₹25.95 billion for FY25. Consequently, the company trades at a negative P/E ratio, ranging from -25.5x to -66.4x, reflecting investor concerns about its profitability. While Meesho reported a positive free cash flow of ₹1,032 crore in FY25, supported by its asset-light approach, the significant net losses remain a major concern.
Competition and Operational Scale
Meesho faces strong competition in the value e-commerce space from players like Flipkart's Shopsy and Amazon's Bazaar. Axis Capital suggests that replicating Meesho's model is challenging, but Shopsy, Flipkart's platform, has already attracted over 50 million monthly active users, with most from Tier-2 and smaller cities. Shopsy also targets value-conscious consumers, offering products below ₹250 and using a zero-commission model to draw sellers, similar to Meesho's strategy. Meesho's market share of over 25% in industry shipments shows its significant scale. Its logistics arm, Valmo, handles over half of its orders, contributing to improved contribution margins of 4.9% in FY25. However, maintaining this operational scale requires substantial ongoing investment. Logistics costs alone increased from ₹4,817 crore in FY23 to ₹7,352 crore in FY25.
Growth Projections vs. Profitability Challenges
Axis Capital forecasts annual growth of 29% in marketplace value and 25% in revenue between FY26 and FY30. This outlook is ambitious given recent financial trends. While annual transacting users (ATUs) grew to approximately 199 million in FY25 and reached 251 million in Q3 FY26, the cost of attracting and keeping these users is rising. Advertising and sales promotion expenses, which had decreased in FY24, surged by 86% year-over-year in H1 FY26 to ₹606 crore. The company's adjusted EBITDA marketplace margin was -4.2% in Q3 FY26. Achieving its target of 3% adjusted EBITDA margins by FY30 hinges on successful ad monetization and operational efficiencies, which have not yet been consistently demonstrated. Meesho's planned IPO in December 2025, aiming to raise up to ₹6,600 crore, highlights its ongoing need for capital to fund growth and technology investments.
Structural Risks and Skepticism
Despite the positive initiation from Axis Capital, significant risks require attention. The core challenge is converting high-volume, low-average-order-value (AOV) transactions into consistent profits. Meesho's net losses widened considerably in FY25 to ₹3,942 crore, even with revenue growth, pointing to increasing costs. Logistics expenses remain a significant expenditure, and any misstep in optimizing them could severely hurt margins. Further investments in advertising, sales promotion, and technology—including ₹1,390 crore for cloud infrastructure and ₹480 crore for ML/AI salaries funded by the IPO—add to the overall cost base. Axis Capital itself points out risks such as slower growth in active users and sellers, logistics costs not decreasing as expected, and less improvement in ad monetization than anticipated. Intense competition from Shopsy could further fragment the market and profit potential. The company's stock performance has also been weak, dropping about 26.4% in the three months leading up to late March 2026, suggesting investor doubt about its turnaround prospects.
Market Potential and Future Outlook
Axis Capital's 'Buy' rating is supported by a positive outlook for India's e-commerce sector, which is projected to grow substantially, potentially reaching $280-300 billion by 2030. The increasing adoption in Tier 2 and Tier 3 cities, now making up the majority of e-commerce demand, aligns with Meesho's strategy. The company's asset-light model and its recent achievement of positive free cash flow in FY25 provide some financial stability. Initiatives like expanding 'Meesho Mall' for branded goods and introducing AI features such as the 'Vaani' voice shopping assistant aim to enhance user experience and create monetization opportunities. However, realizing this full potential will depend on effectively navigating the inherent margin challenges and competitive pressures within the value e-commerce segment.