US-based Fidelity cuts SoftBank-backed Meesho's valuation to $3.5 bn

US-based Fidelity has again cut the valuation of Meesho, valuing the e-commerce start-up at $3.5 billion. This is a decline of about 29 per cent from the SoftBank-backed company’s peak valuation of $4.9 billion.

“Funds attribute value to their portfolio investments, considering various factors such as the valuation of comparable companies,” said a Meesho spokesperson. “Based on Fidelity filings, the number of shares held and the current number of total outstanding fully diluted shares, the valuation is assessed at $3.5 billion. The increase in the number of outstanding shares, notably due to the ESOP pool expansion, could have contributed to this valuation shift.”

At December’s end, Fidelity valued its holding in Meesho at $27.8 million. This is a decrease from the $41.9 million invested in the second half of 2022 via a specific mutual fund unit.

The valuation adjustment follows a secondary sale transaction late last year when early backer Venture Highway sold some of its equity in Meesho to WestBridge Capital valued at $3.5 billion, according to the sources.

Fidelity recently cut Meesho’s valuation to $4.1 billion. Fintech firm Pine Labs, backed by Fidelity, was also valued at $3 billion as of October 31, 2023, a reduction valuation of $4.7 billion on August 31, 2023.

In September 2021, Fidelity led a $570 million round in Meesho along with B Capital Group, a venture capital firm co-founded by Facebook Co-Founder Eduardo Luiz Saverin. Following the fund-raise, the company's valuation more than doubled to $4.9 billion in less than five months. Existing investors Prosus Ventures (formerly Naspers Ventures), SoftBank Vision Fund 2, and Facebook also participated in this round.

Last year Fidelity Investments, marked down the company’s valuation by 9.7 per cent to $4.4 billion as of March 31. It later marked up the valuation at around $5.04 billion.

The new development comes at a time when the Bengaluru-headquartered startup, is currently at a gross merchandise value (GMV) run rate of over $5 billion and its app grew 32 per cent year-over-year in December 2023, outpacing Flipkart’s 21 per cent growth and Amazon’s 13 per cent user growth over the same period, according to a report by TechCrunch which has quoted the information from investment management firm AllianceBernstein.

SoftBank-backed Meesho recently said that its loss narrowed 48.42 per cent from Rs 3,251 crore in FY22 to Rs 1,675 crore in FY23. The firm said that its continued topline growth was further augmented by operating leverage and an increased focus on efficiencies across a number of cost items, including customer acquisition cost, and server and infrastructure cost. Revenue from operations for FY 2022-23 grew by 77 per cent over the previous year to Rs 5,735 crore.

Noida-based merchant commerce platform Pine Labs' value was cut to $3 billion as of October 31, 2023, from $4.7 billion as of August 31, 2023. It had achieved a valuation of more than $5 billion in 2022 when it raised $150 million from Alpha Wave Global. Last year, funds managed by US-based investment management firm Neuberger Berman marked down the valuation of the shares they hold in Indian fintech unicorn Pine Labs by 38 per cent and API Holdings, the parent firm of medical services firm PharmEasy, by 21 per cent. Another investor Invesco, had maintained Pine Labs’ valuation at $5 billion.

BlackRock recently again reduced the valuation of its share in edtech firm Byju’s — this time to about $1 billion. This is 95 per cent less than its peak valuation of $22 billion in 2022.