Meesho Shares Surge to 20% Upper Circuit on Positive Analyst Outlook; Stock Up 95% From IPO Price

Shares of Meesho hit their upper circuit limit, climbing as much as 20% to a record high of ₹216.34 on the NSE following positive analyst coverage. This surge marks a 95% increase from the company's IPO issue price of ₹111.

The rally was sparked by UBS initiating coverage on Meesho. According to reports, UBS highlighted Meesho's asset-light business model and negative working capital, which has led to positive cash flows, distinguishing it from many other internet businesses.

UBS analysts project a 30% compound annual growth rate (CAGR) for Meesho's Net Merchandise Value (NMV) between fiscal years 2025 and 2030. They also estimate that contribution margin (CM) and adjusted EBITDA margin (as a percentage of NMV) will reach 6.8% and 3.2%, respectively, by FY30.

The firm forecasts NMV growth will be fueled by an increase in annual transacting users (ATUs) from 199 million to 518 million during the same period. They also anticipate the annual ordering frequency to rise from 9.2 to 14.7, while average order values (AOVs) are expected to decrease from ₹274 to ₹233 as the company integrates logistics efficiencies.

Understanding Net Merchandise Value (NMV)

NMV represents the total value of goods sold on an e-commerce platform, adjusted for cancellations, returns, refunds, and discounts. It provides a more accurate reflection of actual sales performance compared to gross merchandise value (GMV).

**NMV Formula:**

NMV = GMV − returns − cancellations − refunds − discounts

**Why NMV Matters:**

• Provides a clearer view of genuine sales figures.
• Aids in evaluating customer quality and order fulfillment effectiveness.
• Serves as a key metric for investors and analysts assessing platform efficiency and growth.

**NMV vs GMV:**

• GMV (Gross Merchandise Value):** The total value of all orders placed on the platform.
• NMV (Net Merchandise Value):** The value of orders successfully completed and retained after accounting for returns and cancellations.

For instance, if an e-commerce platform reports a GMV of ₹1,000 crore but experiences ₹150 crore in returns or cancellations, the resulting NMV would be ₹850 crore.

Meesho's IPO Performance

Meesho's shares debuted strongly on December 10 on both the NSE and BSE, listing at a premium of over 46% above the IPO issue price of ₹111. The stock began trading at ₹162.50 on the NSE, a 46.40% increase from the issue price. It then further climbed by 55.58% to ₹172.70.

On the BSE, the stock's market debut was at ₹161.20, reflecting a 45.22% jump. With the stock now at an all-time high on the NSE, it has gained 95% from its initial IPO price of ₹111.

Meesho's initial public offering was oversubscribed by 79.02 times on the final day of the offering.