Meesho IPO Soon? Co-founders Cash in on ESOPs, What's Going On?

As India’s startup ecosystem gears up for another high-profile stock market debut, social commerce giant Meesho is making strategic financial moves. In what can be seen as a prelude to its much-anticipated Initial Public Offering (IPO), Meesho’s co-founders, Vidit Aatrey and Sanjeev Kumar, have exercised a significant number of stock options under the company’s 2024 Employee Stock Ownership Plan (ESOP). This move, valued at a staggering Rs 1,023 crore ($120 million), signals that the Bengaluru-based unicorn is closer than ever to hitting the public markets.

With IPOs of tech startups often watched keenly by investors and industry players alike, Meesho’s listing is expected to be one of the biggest in recent years. The company aims to raise around $1 billion, with reports suggesting that it could file its draft IPO papers in the coming months, possibly targeting a listing around Diwali.

The ESOP Exercise: A Smart Financial Play?

According to filings accessed from the Registrar of Companies (RoC), Meesho’s board has approved the allotment of 20,65,211 equity shares to CEO Vidit Aatrey and 6,59,323 shares to co-founder Sanjeev Kumar. These shares, contrary to speculation, are not new grants but part of the pre-existing ESOP pool.

A company spokesperson clarified the move, stating, “These shares are not additional but part of the previously allocated ESOP pool. Further, the valuation referenced is incorrect, as these shares do not carry any additional value; they are simply existing ESOPs that the founders have chosen to exercise.”

Despite this clarification, market observers see this as a common trend among startups heading toward IPOs—co-founders and senior leadership securing financial benefits before the company officially hits the stock exchange. This often boosts investor confidence, showcasing the founders’ belief in the company’s long-term value.

A Bold IPO Amidst an Uncertain Market

Meesho’s IPO comes at a time when India’s stock market is witnessing both excitement and volatility. The company’s goal to raise $1 billion signals strong confidence in its financial performance and future growth trajectory. Industry experts believe that Meesho’s listing could set a new benchmark for Indian e-commerce startups, following in the footsteps of Zomato, Paytm, and Nykaa.

One of Meesho’s key strengths is its deep penetration into India’s tier-II and tier-III markets, catering to value-conscious consumers. Unlike traditional e-commerce giants like Flipkart and Amazon, which focus on premium and urban audiences, Meesho has built its success on affordability and accessibility, particularly for small businesses and home entrepreneurs.

Meesho’s Financials: A Turnaround Story?

Over the past year, Meesho has made significant strides in improving its financial health. The company reported a 33% year-on-year revenue growth, reaching Rs 7,615 crore for the fiscal year ending March 2024. More impressively, Meesho has managed to reduce its adjusted losses by 97%, bringing them down to just Rs 53 crore. Such financial discipline could make it an attractive bet for investors looking for profitable e-commerce ventures.

Adding to its strengths, Meesho also operates Valmo, its in-house logistics platform, which now handles over 50% of its total order volume. This move toward self-reliance in logistics could be a game-changer in improving profit margins, reducing dependency on third-party delivery services, and enhancing operational efficiency.

Employee-Centric Approach: The Rs 200 Crore ESOP Buyback

While the co-founders’ ESOP exercise has grabbed headlines, Meesho’s employee stock ownership strategy extends beyond its leadership team. In 2024, the company announced its largest-ever ESOP buyback program, worth Rs 200 crore ($25 million). This initiative benefits 1,700 past and present employees, including junior executives and senior leadership.

Such initiatives highlight Meesho’s commitment to rewarding its workforce, a crucial factor in retaining top talent in the competitive startup ecosystem. In a market where stock-based compensation has become an industry norm, buybacks like these often boost employee morale and reinforce the company’s position as an employee-friendly workplace.

The Road Ahead: Can Meesho Outshine Its Rivals?

Meesho currently ranks as India’s third-largest horizontal e-commerce platform, trailing behind industry heavyweights Flipkart and Amazon. However, its unique positioning in the low-cost, high-volume segment has given it a strong foothold among Indian consumers who prioritize affordability.

With 1.3 billion orders delivered in the first nine months of FY25, Meesho’s scale is undeniable. But as it heads toward its IPO, the company faces stiff competition not just from established players but also from emerging startups and new-age social commerce platforms.

The key question remains: Can Meesho sustain its growth while maintaining profitability? Investors and analysts will be closely watching how the company plans to navigate challenges like regulatory scrutiny, competition, and post-IPO market expectations.

A Landmark IPO in the Making?

Meesho’s journey from a small startup to an IPO-bound unicorn has been nothing short of remarkable. With its focus on India’s mass market, strong financial performance, and employee-friendly policies, the company has set itself up for a high-stakes debut on the stock exchange.

Whether the IPO turns out to be a blockbuster success or faces hurdles along the way, one thing is certain—Meesho’s stock market entry will be a defining moment for India’s startup ecosystem. As investors, industry insiders, and consumers await the final details, Meesho’s story continues to unfold, proving yet again that Indian startups are ready to take on the global stage.