Meesho funding: Meesho closes $275 million funding in first tranche, in talks for more

Ecommerce firm Meesho has closed a $275 million funding round through a mix of primary and secondary share sales, two people aware of the matter said.

A regulatory filing with the US Securities and Exchange Commission (SEC) also indicated share transfer at Meesho’s US parent firm without offering further details.

This marks the first tranche of a larger financing round of $600 million that the Bengaluru-based company, which competes with Amazon India and Flipkart, is aiming to close, according to a person aware of the matter. “The details are still being worked out for the broader round on valuation. It would be up to $3.9 billion but will be finalised once the round closes,” this person added.

$1.36 billion raised since 2015

Meesho “has closed the first part of the funding round with existing investors and with new investors also joining the round. It (Meesho) is still finalising the allocation for the rest of the funding round”, sources said.

ET had first reported on March 8 about Meesho being in talks for at least a $200 million secondary funding at a valuation of $3.5-3.9 billion with participation from new investor Tiger Global and existing backer Peak XV Partners, formerly Sequoia Capital India.

Since then, there has been an increase in the size of the overall round with a primary component being added, people aware of the matter said.

In a secondary transaction, investors sell shares to each other, and money doesn’t go to company coffers.

In total, Meesho has raised $1.36 billion – including secondaries – since 2015.

An email sent to Meesho did not elicit any response till press time Friday.

Long in the works

Meesho’s early investors have been actively looking to exit from the ecommerce company. Last year, Venture Highway made a partial exit from the firm when WestBridge Capital bought into the company, which is also backed by Prosus and others.

“Mostly, it’s pre-series A investors who are exiting,” a source said, adding Meta too was approached to offload a part of its stake in the nine-year old unicorn.

Meesho last raised primary capital of $570 million in September 2021.

A top ecommerce investor — known for having taken a bet on Flipkart early on — has also been in discussion with the company to invest in the new round but it is not clear if it’s finally participating in the funding process.

“Meesho’s ability to sustain operating growth while having reduced its monthly burn significantly over the last year has drawn investor interest. It’s also happening at a discount to the past peak valuation of nearly $5 billion,” another person aware of the talks said.

The latest funding exercise has been in the making since January.

Peak XV Partners — for instance — was initially looking to lead the secondary share sale but the round contours have changed since then. ET reported on May 8 that Meesho was one of the deals being actively stitched up by SoftBank after a year of lull when the Japanese tech investor largely exited from its public market bets in India.

“The board and company investors advised Meesho to focus on raising primary capital as well as there is traction now for late-stage deals,” according to a person aware of details, who said Meesho was also advised to “account for a tax payout (in future) when it has to move domicile (back to India from the US) to further its IPO plans.”

“The idea is to not touch existing capital — that’s for operations and competitive reasons when rivals start spending again,” he added.

Homecoming

Meesho is under active discussions to reverse flip its US parent — linked to its future plans for an IPO in India. It is yet to firm up its plans.

On Thursday, fintech Groww said it has completed moving domicile back to India as of March 2024. Both Groww and Meesho are Y Combinator alumni and raised initial capital from the Silicon Valley investor through the US holding company.

Companies have to pay taxes in India or in the US to reverse flip their holding companies here depending on the merger process. “It’s a big amount so it has to be accounted for and that’s why Meesho is raising primary capital,” one of the sources mentioned above said.

PhonePe’s largest investor Walmart had to cough up nearly $1 billion to the Indian government here for the payments company to move its holding company here from Singapore.

Besides PhonePe and Groww, several Indian startups with domicile in the US and Singapore are in various stages of relocating to India. Fintechs like Pine Labs and Razorpay, along with quick commerce firm Zepto, edtech firm Eruditus, and Udaan are also planning to move their holding companies back to India.