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 market growth and improved profitability offset investments in artificial intelligence (AI), logistics and newer businesses.

Bengaluru-based company reports consolidated revenue from operations ₹3,712.8 crore in the quarter ended June 30, higher than before Bloomberg‘s consensus estimate ₹3,601.5 crore as per seven analyst estimates.

Consolidated net loss ₹132.8 crore, compared to Bloombergestimated loss ₹135.2 crore as the company continues to invest in growth initiatives amid intensifying competition in the e-commerce sector.

Operating performance remained solid. Net product value (NMV), the total value of orders successfully delivered on its platform, increased by 34% compared to last year. ₹11,614 crore. Annual transacting user base increased 29% to 274 million, while quarterly orders increased 29% to 725 million; This reflects consistent customer additions and higher repeat purchases.

The number of sellers making annual transactions rose 81% to 1.04 million, powered by AI-powered tools that help sellers create product catalogs, understand demand trends and communicate with customers in regional languages.

During the earnings call, chief financial officer Dhiresh Bansal said AI helps streamline vendor onboarding through automatic product classification and catalog creation. “Many features for autofilling a product required the seller to do it, which used to be quite time-consuming and also caused a lot of product drop-offs,” he said.

Better profitability

The shareholder letter emphasized that profitability was improving despite ongoing investments. Contribution margin, a measure of earnings after direct operating costs such as logistics and payment expenses, rose to 4.6% of NMV from 4% in the previous quarter, driven by lower logistics costs, increased demonetization and fewer canceled and returned orders.

Revenue from marketplace business increased 48% year-on-year ₹3,707 crore, while the adjusted EBITDA of the market is ₹From 139 crore ₹198 crore in the previous quarter. The company ended the quarter with a cash balance ₹6,521 crore.

Beyond its core market, the company said its branded goods platform, Meesho Mall, is now home to more than 1,200 brands and is experiencing annual growth of approximately 93% in NMV. Creator-led shopping business Content Commerce saw 141% growth in NMV, with the number of content pieces generating active orders rising to 1.7 million in the quarter.

Bansal said the company expects logistics costs to continue falling despite high fuel prices and wage inflation. “We expect to continue gaining efficiencies…our cost per order delivered has actually fallen by about a rupee even this quarter compared to the previous quarter,” he said. Future logistics efficiencies will largely be passed on to sellers and customers through lower prices, while advertising revenues will remain the key driver of margin expansion.

Bansal said almost two-thirds of sellers contributing to Meesho’s gross merchandise value (GMV) now advertise on the platform. “We continue to see this happen… not only are new sellers becoming active in ads, but they are also starting to use ads for more and more catalogs,” he said.

Meesho shares closed at: ₹188.95 per capita on the National Stock Exchange on Thursday, down 0.5% from the previous close.

Appearance

Looking forward, the company said it expects marketing and customer acquisition spending to increase starting in the second quarter as it prepares for the holiday shopping season.

He also said second-quarter NMV growth may look weaker on a year-on-year basis because the shifting of the flagship Meesho Mega Blockbuster Sale from the second quarter of last year to the third quarter of this year makes the comparison less meaningful.

Founder and chief executive officer Vidit Aatrey said the company’s long-term outlook remains unchanged. “Other than a higher share of sales and marketing spend last financial year, nothing else has changed in the core business,” he said, adding that Meesho continues to expect compound annual NMV growth of around 25% over the next five years.

On competition, Aatrey said, “There has always been competition and the intensity of competition in our industry… I cannot say that the intensity of competition has changed in either direction.” He said Meesho will continue to focus on improving pricing, selection and seller engagement as it scales the business.

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

Kirana Club creates a “disruptive value proposition for companies,” Aatrey said. kiranas nationwide, serving retailers even in small towns and rural areas,” he said. “The business is really small… it’s early product-market fit, so we have to do a lot before we start contributing to the company’s bottom line,” he said.

Regarding Meesho’s grocery ambitions, Aatrey said the company is experimenting with a low-cost local logistics network because many grocery items “will be difficult to ship into the country.” “We believe this is pretty important in the long term… but we’re still in the experimental phase,” he said.

Investments in new ventures are subject to approximate annual budget ceiling, CFO Bansal said ₹200 crore until the product adapts to the market.

GST treatment issue

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

InGovern claimed that Valmo’s classification as a goods transportation agent (GTA), a category that receives different GST treatment on shipping services, may have reduced tax expenses and improved Meesho’s economics.

Responding to the issue, Bansal said Valmo Transport brings together first, middle and last mile logistics partners and operates under a valid GTA classification under the GST law after an internal restructuring.

“We… looked at both the letter and spirit of the law,” he said, adding that the company sought legal and accounting opinions before implementing the structure. Bansal said Meesho has not received any communication from Sebi or tax authorities on the issue. “We have not been asked any questions by any regulatory or tax authority regarding this matter… We have good reasons to believe that there is no exposure to any risk arising from this.”