Meesho says Indian e-commerce starts with good cash flow

Meesho has become India’s first horizontal e-commerce company to generate positive cash flow, marking a major shift in a market where profitability has been elusive as new competitive threats emerge.

The SoftBank and Prosus-backed startups, which serve customers in small towns and cities in India, reported positive cash flow of ₹232 crores ($27.6 million) for the fiscal year ending March 2024, while growing operating income by 33% to R7,615 crores. ($905.6 million). Its adjusted loss fell by 97% from ₹1,569 crores to just ₹53 crores.

Meesho’s growth remains faster than the growth of e-commerce in India. Growth in India’s e-commerce industry is expected to reach 17% in 2024 before rising to 20% in 2025, Bank of America analysts said this week. This slow growth is due to the impact of declining consumption and the slow growth of the clothing industry.

Flipkart’s marketplace arm grew revenue by 21% to $2.12 billion in the fiscal year ending March, it disclosed in a filing this week. Its loss fell 41% to $280.4 million.

India’s commercial market is simultaneously being restructured by fast-moving firms in urban cities. Blinkit, Zomato’s fast-commerce arm, has expanded its network of so-called black stores – warehouses where it stores inventory – and increased SKUs from 4-5,000 to over 10,000. The platform also introduced new features including installment payment options for purchases over R3,000 ($35.7), 10-minute returns on clothes and shoes, and split shipping to expand your reach.

Fast e-commerce players – including BlinkIt, Nexus-backed Zepto, Prosus-backed Swiggy’s Instamart and Tata-owned BigBasket – plan to make annual sales of around $6 billion this year, according to an analysis by -TechCrunch.

For older players, the battle increasingly seems to be about controlling the full stack. Both Amazon and Flipkart now handle around 90% of their deliveries in-house, while Meesho launched its own logistics service called Valmo to improve shipping costs. Valmo handles about 35% of all Meesho orders, Bank of America said.

This change comes as the competition for India’s next 100 million online consumers. Meesho reports that 45% of its customers now come from tier 4 cities and above, with 145 million unique mobile users a year – representing about 10% of India’s population.

“We are also seeing a huge influx of new e-commerce users, which shows our success in finding customers in India’s underserved markets,” Meesho said in a statement. “This not only highlights the huge potential of e-commerce in India but also underscores our important role in making e-commerce accessible to historically neglected regions.”

Bank of America expects about 120 million new online shoppers to enter the e-commerce market in the 2024-27 period, with a potential base of 380 million. About 75% of these new users are expected to come from Tier-2/3 cities, which represent a distinct set of first-time internet consumers.