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News Topical, Digital Desk : Lower circuit: Shares of e-commerce platform Meesho are now experiencing a sharp correction after a strong post-listing rally. On Monday, the shares slipped to ₹201.68 and entered the lower circuit. Meesho has seen a decline of nearly 10% in the past two consecutive trading sessions. Prior to this, the stock had more than doubled its IPO price in a little over a week immediately after listing.
Meesho made a spectacular listing at ₹162, a 46% premium over its initial public offering price of ₹111. At the end of the first day's trading, the stock closed around ₹170. The three-day IPO, with a size of over ₹5,000 crore, received a total subscription of 79 times. Retail investors alone accounted for 19 times the share.
A sharp rally and subsequent pressure: Meesho's stock has surged nearly 110% from its issue price in the past seven trading sessions. This sharp rally triggered a short squeeze, resulting in over 10 million shares going into the exchange's auction mechanism. Indeed, many short sellers were unable to deliver shares on time. The company's free-float is only around 6%, which is causing sharp fluctuations in the stock. IPOs with low free-float have seen similar setbacks in recent months. A similar scenario was witnessed last month with Groww shares, where 3 million shares went under the hammer after a surge of 89% amid limited supply. Meesho's rally so far has created wealth worth over ₹50,000 crore for investors.
Brokerage Opinion Global brokerage UBS initiated coverage on Meesho, assigning a 'Buy' rating and a target price of ₹220. According to UBS, the company's asset-light model, negative working capital cycle, and stable cash flow generation are major plus points. UBS expects Meesho's net merchandise value (NMV) to grow at a CAGR of 30% during FY25–30E. This growth will come from annual transacting users increasing from 199 million to 518 million and increasing ordering frequency, although the average order value is expected to decline from ₹274 to ₹233. Choice Institutional Equities also expressed a positive stance on the stock, saying, "With its zero-commission, low-AOV, and discovery-led platform, Meesho can best capitalize on this shift in tier-2 and tier-3 cities." Choice has given a target price of ₹200 for the stock, which represents an upside of approximately 80% from the IPO price.
Forward Outlook While the recent correction may have dampened investor enthusiasm in the short-term, experts believe the long-term growth story remains strong. Strong demand in tier-2 and tier-3 cities, user engagement, and positive brokerage reports remain supportive factors for Meesho.
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