Buy Meesho Ltd for Target Rs.210 by Choice Institutional Equities
Lock-in Expiry in Focus: Potential Overhang Despite Robust Growth
The lock-in ~68% of Meesho's pre-IPO shareholding is set to expire on 9th June ’26, making shares worth approximately INR 540 Bn eligible for trading from the following day. This excludes ~20% of the company's share capital which remains under lock-in until 9th June ’27, as disclosed in the prospectus. Even assuming that only ~10% of the company's outstanding shares will be available for trading immediately after the lock-in expiry, potential secondary market outflows could be to the tune of ~INR 54 Bn, nearly equivalent to the entire IPO size of Meesho (INR 54 Bn). This liquidity event would create a temporary downward pressure on the shares as many early PE/VC investors would try and offload their holdings as they are sitting on significant unrealised gains.
As mentioned in our previous report, Meesho’s key operating metrics have improved meaningfully, but it is yet to translate into a material uplift in ad monetisation, which is expected to be gradual. Moreover, with most near-term positives largely priced in, we see limited upside from current levels. While our long-term view on Meesho remains intact owing to strong user-led scale-up and continued expansion of the seller ecosystem, the current fundamentals along with the lock-in expiry event would create a downward pressure on shares in the near-term. Thus, we continue to value Meesho at 4.0x FY28E EV/Revenue and maintain our ‘ADD’ rating with a target price of INR 210
Large Lock-in Expiry Could Cause Near-term Supply Overhang:
Pre-IPO investors as per SEBI are bound by a mandatory lock-in period of 6 months after listing of their shares. About 68% of Meesho’s shareholding worth INR 540 Bn (at CMP) will be eligible for trade for the first time once the lock-in for these shares expires on 9th June ’26 i.e. shares would be available for trading the next day. Of these ~68% locked-in shares, ~58% are held by various PE/VCs, whereas the promoters own 6%. Also, 20.4% stake owned by the promoters and some pre-IPO shareholders will continue to have a lock-in period till 9th June ’27 as per the company’s prospectus
Large Share Unlock Mirrors Previous New-age Tech Listings:
Historically, listed new-age tech companies in India see significant secondary supply and downward pressure on shares after the lock-in expires. Given Meesho's premium valuation of ~6.1x EV/Revenue relative to broader internet peers and substantial unrealised gains held by several early-stage investors, the upcoming lock-in expiry may trigger partial profit-booking.
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SEBI Registration no.: INZ 000160131
