Angel investors and early institutional shareholders of the e-commerce firm Meesho are in talks with potential investors to sell off their shares, according to individuals familiar with the situation.
Discussions are underway for a transaction with a valuation ranging from $3 to $3.5 billion, though this figure is subject to change, as per individuals briefed on the matter.
According to sources, WestBridge Capital and Norwest Venture Partners are among the entities that have held talks with Meesho’s early investors.
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, sold a portion of its stake in the company to WestBridge Capital in October. Nevertheless, it still holds a 1% share 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.”
Certainly, secondary transactions usually occur at a discount compared to the latest primary valuation. The magnitude of this discount, however, could influence the timing of the company’s pursuit of new primary capital.
A representative from Meesho opted not to provide a comment, citing adherence to the company’s policy.
Inquiries directed to Norwest Venture Partners and WestBridge Capital failed to elicit any response.
“There are additional investors expressing interest,” stated another individual familiar with the matter. The identities of these investors were not immediately available.
Sources added that Venture Highway intends to divest its remaining 1% stake in Meesho during this round. Notable early investors in Meesho include Maninder Gulati from Oyo and Arun Sarin, the former chief of the Vodafone group.
Meesho’s Financial Highlights:
On December 29, Meesho reported a 48% reduction in its loss for the fiscal year ending March 31, amounting to INR 1,675 crore. Simultaneously, the operating revenue experienced a substantial growth of 77%, reaching INR 5,735 crore.
For the first half of FY24, the online marketplace reported a 37% year-on-year increase in its operating revenue, reaching INR 3,521 crore, along with a substantial 90% reduction in loss to INR 141 crore.
Read Other Articles: Meesho’s FY23 revenue soars to INR 5,735 Crore, marking a 77% growth as losses narrow by 48%
The company announced its attainment of profitability for the September quarter but refrained from providing specific figures. Meesho’s Chief Executive, Vidit Aatrey, had previously mentioned in August that the firm had achieved its first after-tax profit for the month of July.
During the ongoing funding downturn, prominent startups have enabled investor exits through secondary investments. Simultaneously, they are bringing in new investors in anticipation of a potential initial public offering (IPO) in the next two to three years.
On December 25, it was reported that FirstCry underwent a secondary share sale exceeding INR 1,000 crore late last year, just before filing its draft IPO papers.
While 2023 witnessed a seven-year record low for primary funding for startups in India, totaling around $8.8 billion, investors and founders have conveyed their expectations of more secondary funding deals happening in 2024.
In a secondary share sale, the funds go to the investor selling the stake, while primary funding is injected into the company for various purposes. One of the most significant deals of this kind in 2023 was Lenskart’s $600 million funding, with approximately $450 million allocated to the secondary transaction. This occurred when ADIA (Abu Dhabi Investment Authority) and Chrys Capital invested in the Gurgaon-based omni-channel retailer.