Meesho’s early backers eye new secondaries at $3-3.5 billion valuation

Angel investors and early institutional shareholders in ecommerce company Meesho are in discussions with investors to divest their stake, people aware of the matter told ET.

Talks are on for a transaction at a valuation of $3-3.5 billion, but this figure may change, people briefed on the matter said.

WestBridge Capital and Norwest Venture Partners are among the entities that have held talks with Meesho's early investors, the sources said.

The development underscores the growing trend of secondary share sales in late-stage firms. New investors are also looking at assets that have been able to withstand the funding drought and reduce operating burn over the last year or so.

Meesho’s early investor Venture Highway had sold a part of its stake in the company to WestBridge Capital in October, but it still has 1% in the SoftBank and Meta-backed startup, which was last valued at nearly $5 billion in 2021.

“WestBridge has indicated it wants to buy more in Meesho and Norwest has also held talks,” a person briefed on the discussions said. “The conversations are largely around the pricing of the deal, as older investors want to make an exit now.”

To be sure, secondary transactions typically happen at a discount to the last primary valuation. The extent of the discount, however, may have a bearing on when the company goes out to raise new primary capital.

A spokesperson for Meesho declined to comment, citing company policy.

Queries sent to Norwest Venture Partners and WestBridge Capital didn’t elicit any response.

“There are a few more investors who have shown interest,” another person aware of the matter said. The names of these investors weren’t immediately available.

Venture Highway has plans to sell its remaining 1% stake in Meesho in this round, sources added. Oyo’s Maninder Gulati and former Vodafone group chief Arun Sarin are among Meesho’s early investors.

On December 29, Meesho said its loss for the year ended March 31 narrowed by 48% to Rs 1,675 crore, while operating revenue grew by 77% to Rs 5,735 crore.

For the first half of FY24, the online marketplace said its operating revenue increased by 37% year-on-year to Rs 3,521 crore, with a 90% reduction in loss to Rs 141 crore.

The company said it has achieved profitability for the September quarter but did not give any numbers. In August, Meesho chief executive Vidit Aatrey had said the firm had clocked its first profit after tax for the month of July.

Secondaries in focus

Amid the current funding winter, large startups have facilitated investor exits through such secondary investments, while onboarding new investors ahead of a potential initial public offering (IPO) over the next two to three years.

ET had reported on December 25 that FirstCry saw more than Rs 1,000 crore in secondary share sale late last year before it filed its draft IPO papers.

While 2023 saw a seven-year record low for primary funding for startups in India at around $8.8 billion, investors and founders have told ET they expect more secondary funding deals to happen in 2024 as well.

In a secondary share sale, the money goes to the investor selling the stake while primary funding is infused in the company for various use cases. Lenskart’s $600 million funding, of which about $450 million was in secondary transaction, was among the biggest such deals in 2023, when ADIA (Abu Dhabi Investment Authority) and Chrys Capital invested in the Gurgaon-based omni-channel retailer.