Meesho's valuation slashed 10% to $4.4 billion by Fidelity Investments

Fidelity Investments, a prominent investor in homegrown e-commerce marketplace Meesho, has marked down the company’s valuation by 9.7 per cent to $4.4 billion as of March 31.

This is according to the regulatory filings with the US Securities and Exchange Commission (SEC).

Fidelity holds stakes in the e-commerce firm through multiple funds such as the Variable Insurance Products Fund III and IV, and Fidelity Central Investments Portfolio LLC. 

The firm had, alongside Facebook co-founder Eduardo Saverin-led B Capital, had led a huge $570-million series F funding round in Meesho in September 2021 at a valuation of $4.9 billion.

This comes at a time when several prominent Indian unicorns have had their valuations cut by overseas investors.

These include edtech unicorns Eruditus and Byju’s, food aggregator platform Swiggy, cab-hailing platform Ola, fintech company Pine Labs and online pharmacy Pharmeasy.

These markdowns are, however, based on internal assessments of asset management companies and may not indicate a permanent markdown. The valuations may also be marked up as market conditions improve.

Softbank and Prosus-backed Meesho, like many other start-ups, has recently been undergoing retrenchments. It looks to reduce burn and turn profitable, eyeing a public listing by 2025.

Meesho had reportedly laid off 251 employees earlier this month, which co-founder and chief executive officer (CEO) Vidit Aatrey dubbed “judgement errors”. 

Before that, Meesho had laid off 150 employees in April last year after it re-branded its grocery arm from Farmiso to Superstore. Then in August, it fired another 300 people as it announced the closure of its grocery business. The company has also reduced its monthly cash burn by over 85 per cent to $5 million currently from around $40 million in early 2022. It is now looking to trim its annual revenue growth target to 40 per cent from over 100 per cent earlier. 

In FY22, Meesho saw its revenues jump 4.5 times year-on-year (YoY) to Rs 3,232 crore. But its losses rose even more steeply by 7.5 times to Rs 3,247 crore.  

Several investors and industry watchers Business Standard spoke to said that large Indian start-ups are likely to face down rounds in the near future. Valuation multiples, they said, have fallen by as much as 50-70 per cent as funding has come down to a trickle.

A down round takes place when a company raises fresh funding and its pre-fundraise valuation for the current round is lower than the post-fundraise valuation after its previously raised round. The overall valuation of the firm, therefore, takes a hit.

Valuation markdowns, said analysts, could add to the negative sentiment on the market in the short term, while improving buying opportunities for investors. The medium-or-long term impact is, however, likely to be minimal.