Meesho caught the attention of investors with its entry in the Indian IPO market. When the public issue of the company came, it got a tremendous response and the stock made a strong debut on the day of listing. After this, the rise in prices attracted many investors, but the question remains whether it would still be wise to invest in it or is it too risky. To know the answer to this, it is important to understand not only the movement of the stock but also the business model and financial health of the company.
Why did Meesho’s share come into discussion after listing?
Meesho’s IPO came with heavy oversubscription and the shares debuted well above the issue price at the time of listing. It saw sharp fluctuations on the very first day and within a few days it made a new high. Investors who did not get shares in the IPO, bought them from the open market, due to which the demand for shares increased further. However, experts believe that it is not right to take investment decisions only by looking at listing gains.
Meesho’s strong hold in small towns
The company’s business mainly depends on Tier-2 and Tier-3 cities. Most of its orders come from small cities and towns, where customers prefer low-cost products. Here buyers place small orders at low prices more often, due to which traffic remains on the platform. Due to this strategy, Meesho has given tough competition to big e-commerce platforms in these areas.
Different business model created identity
Meesho’s model is different from other e-commerce companies. It does not charge platform fees from sellers and does not charge any extra fees for buyers. The company’s income comes from logistics, fulfillment service and advertising. By focusing on low prices and repeat customers, Meesho has created its own market, which makes it different from other companies.
Where will the money received from IPO be used?
The company will use the money raised through IPO to further strengthen its business. This includes improving technology and cloud infrastructure, spending on marketing, possible acquisitions and new business ideas. It is believed that this will improve the experience for both buyers and sellers on the platform and will accelerate the growth of the company.
The biggest question: when to make profits?
Meesho’s biggest weakness still remains its profitability. Although the company’s losses have reduced in the last few years and there has been a sharp increase in revenue, the business has not yet become completely profitable. In recent months, losses have increased again due to increasing marketing and technology expenses. The company has shown improvement on the cash flow front, but maintaining it in the long run will be a challenge.
What to think before investing?
Experts believe that Meesho is a fast-growing and innovative e-commerce platform, which has a strong hold in small cities. There are huge opportunities for growth, but there is uncertainty regarding profits. In such a situation, this stock may be more suitable for those investors who are ready to take risk and have a long-term perspective.
