Meesho, an e-commerce company backed by SoftBank, plans to develop a financial services platform and expand its grocery delivery business in the upcoming financial year. This strategic move comes after a dedicated year of efforts to reduce significant losses, aligning with the broader trend in the online commerce industry, where companies are prioritizing profitability amidst increasing competition.
Walmart-owned Flipkart is making significant strides in the fintech arena with the establishment of its own venture, Super.Money, led by senior executive Prakash Sikaria. The company has committed an investment of $15-20 million to propel this new initiative.
“Flipkart is already testing a full-stack buy now-pay later and personal loan platform,” said a person aware of the matter. “It’s scaled quite fast and more lending products will be added this year.”
Meesho aims to initiate a credit marketplace, sourcing borrowers on behalf of its lending partners, which include both banks and non-banking financial companies (NBFCs). The company is set to earn a commission for every disbursal in this arrangement.
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“They (Meesho) are experimenting with a lending platform, but there is a serious focus on this internally. It’s still early days,” said a person aware of plans.
According to a spokesperson from Meesho, ventures into financial services and grocery represent just a couple of the diverse initiatives the company is undertaking. The spokesperson highlighted that the startup has identified challenges related to accessing credit lines.
“Initiatives like providing sellers quicker access to payments are driving both financial inclusion and the growth of small businesses,” the spokesperson said.
After downsizing in 2022, the e-commerce company is now contemplating a re-launch of its services, with plans to reintroduce the service in one or two cities starting in April, as mentioned by the sources.
“They may expand, depending on how it goes,” one person said.
A senior fintech executive said, “For ecommerce players with a large user base, offering financial services is understandable, but there are large investments required since it is a regulated space. Also, the quality of the book is important, given the kind of users it caters to.”
Bigger rival Amazon India offers consumer credit and payment services through Amazon Pay. In parallel, the group’s e-commerce arm, Tata Neu, has ventured into lending to consumers, partnering with multiple financiers, including Tata Capital.
The executive emphasized that Meesho is not merely interested in functioning as a lead generator for its lending partners. Instead, the company is focused on developing its own credit underwriting models, decision-making systems, fraud detection, and other related capabilities. The objective is to establish a comprehensive suite of credit products.
The startup’s recent endeavors are perceived as connected to its aspirations of achieving a higher growth rate in the upcoming fiscal year. According to several informed individuals, the company is actively searching for a senior executive to spearhead the lending function. Simultaneously, it is working towards establishing an in-house credit risk and data science team.
Initially concentrating on handling merchant loans, Meesho aims to extend its lending services to consumers, particularly in non-metro areas. The platform predominantly features products with an average selling price below INR 500.
“When you are pitching to large banks and NBFCs for business partnership, you need to give them the right customers and also manage the book so credit losses do not shoot up,” said one person quoted above.
In 2022, Meesho underwent a substantial reduction in its grocery operations as part of an internal reset. Formerly operating the business under the name Farmiso, it rebranded it as Meesho Superstore and seamlessly integrated it into the main app. During this period, the company terminated at least 150 on-contract employees, along with off-roll staff.
“The burn is likely to go up in the low-margin grocery business, with expansion. The extent of aggressiveness will determine the scale,” said a person aware of current plans.
At a Flipkart townhall last week, the group chief executive, Kalyan Krishnamurthy, shared with employees that the company’s grocery business witnessed a substantial 50% year-on-year growth in 2023.
In 2023, the Bengaluru-based company terminated 15% of its workforce across 251 roles, citing the optimization for a “leaner organizational structure to attain sustained profitability.”
In FY23, Meesho achieved a 48% reduction in losses to INR 1,675 crore, while experiencing a remarkable 77% growth in operating revenue, reaching INR 5,735 crore. For the April-September 2023 period, the company reported a 37% year-on-year increase in operating revenue, totaling INR 3,521 crore, coupled with a substantial 90% reduction in losses, amounting to INR 141 crore.
In August last year, Meesho announced its first profits for the month of July. Subsequently, in a media statement released in December, the company affirmed the profitability of the September quarter, although specific numerical details were not disclosed.
On January 25, it was reported that Krishnamurthy informed Flipkart employees that the company was close to achieving profitability.
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