Meesho’s topline nears Rs 800 Cr in FY21, logistics cost Rs 645 Cr

Meesho, the poster boy of social commerce in India has been changing its track to challenge horizontal e-commerce majors Flipkart and Amazon. While it will take time to analyse how Meesho’s growing e-commerce ambitions fare up, the Facebook-backed company grew 2.6X to around Rs 793 crore in FY21 from Rs 307 crore in FY20. 

For context, Meesho provides marketplace services including delivery and order fulfilment to buyers on its social commerce platform and connects suppliers to them.

This is the second consecutive year in which the Bengaluru based company has recorded bumper growth after scaling 3.8X during the fiscal preceding FY21. The Naspers backed company also collected non-operating income of Rs 48.5 crore from its financial assets during FY21, its annual financial statements show.

Since Meesho handles the delivery and order fulfilment side of the marketplace, expenses on logistics and manpower are the largest cost centre of the company, accounting for 48.2% of its costs in FY21. Such costs grew in line with the scale of orders on its platforms, amounting to Rs 645 crore in FY21 up 2.5X as compared to Rs 260.8 crore during FY20.

During the fiscal marred with COVID 19 disruptions, the company boosted its customer acquisition activities in a bid to attract new users to its marketplace platform as both buyers and prospective sellers looked to online business. Advertising and sales promotion expenditure made up 31.7% of Meesho’s annual expenses, growing by 95.1% from Rs 217.4 crore in FY20 to Rs 424.2 crore during FY21.

At the onset of the pandemic and its related lockdowns, the company had reportedly shed around 200 employees from its then employee base of 700 but hiring was to pick up later in the year with staff costs amounting to 11.2% of its annual cost. Such expenditure grew 39.5% to Rs 149 crore during FY21 from Rs 107 crore in FY20 including share-based payments of nearly Rs 37 crore.

Importantly, out of Rs 37 crore spent on “Employee stock option expense” around 63.7% i.e. Rs 23.56 crore worth stocks were earmarked for founders Vidit Atrey and Sanjeev Kumar during FY21. Meesho also exercised its second ESOP buyback event worth $5.5 million (Rs 40 crore)  during the same period.

Moving down in the expense sheet, we found that Meesho’s expenses on IT & Communication surged nearly 2.4X to Rs 89.04 crore during FY21 from Rs 37.8 crore spent on the same in FY20. Further, the company also wrote off loans given to suppliers worth Rs 6.8 crore and made provisions of Rs 2.3 crore for doubtful deposits and advances.

Legal and professional fees is the only payment head that went down during the last fiscal, reducing by 71.05% to only Rs 3.3 crore during FY21 from Rs 11.4 crore paid in FY20.

The social commerce unicorn spent Rs 1,337.3 crore in total during FY21, 104% more as compared to Rs 655.4 crore spent in FY20. On a unit level, Meesho India spent Rs 1.69 to earn a single rupee of operating revenue in FY21, improving by 20.6% as compared to Rs 2.13 spent for the same in FY20.

Net cash outflow from operations also improved by 19.1% to around Rs 247 crore in FY21 as compared to the outflow of Rs 305 crore during FY20 even with the increase in the scale of operations. However, EBITDA margins stood at -58.4% and annual losses surged by 62.6% to Rs 498.65 crore during FY21 from Rs 306.7 crore lost in FY20.

For Meesho, the search for a sustainable, scalable business model is taking it to unexpected places, including going up against e-commerce giants like Amazon and Flipkart. These giants are not lying still, as Flipkart has shown with its own Shopsy offering that targets Meesho’s reseller focused part of the business.

Even on the social commerce front, well funded D2C platforms have been ramping up, making it all the more important for Meesho to find answers before the funding tap starts drying up. It has also put its international expansion plans on hold it seems, as competition on its domestic turf heats up. FY22 could be a decisive year in terms of establishing a roadmap for what works, in that sense for Meesho.