New Delhi: Brokerage firm Motilal Oswal Financial Services has initiated coverage on e-commerce platform Meesho with a Buy rating and a target price of ₹240, expressing confidence in the company’s long-term growth prospects. Meesho’s asset-light business model, negative working capital, and strong free cash flow (FCF) generation ability make it one of India’s best internet business opportunities, it says.
Unlike the large-scale retailers who spend big on warehouses, inventory, and logistics, Meesho has the marketplace model in which sellers sell products and the platform connects buyers to merchants. This gives Meesho the flexibility to scale rapidly without capital expenditure, which makes it very efficient.
Why Motilal Oswal is Bullish?
Motilal Oswal values Meesho at 30x FY31 estimates on adjusted marketplace EBITDA discounted back to September 2028. This value for the company translates into an Enterprise Value (EV) to Net Merchandise Value (NMV) multiple of around 1.4x FY28 estimates, which is more than 10% higher than Meesho's valuation.
The brokerage believes Meesho deserves this premium because it’s a capital-efficient model that creates healthy cash flow while requiring little investment in physical assets.
Strong Growth Forecast
Motilal Oswal expects Meesho to deliver a 25% compound annual growth rate (CAGR) in marketplace NMV from FY2026 to FY2031. This growth is expected to be driven by:
- Continued customer acquisition
- Rising platform adoption across India.
- Expansion into new product categories.
- Better seller participation
The brokerage forecasts that both adjusted marketplace EBITDA and reported Profit After Tax (PAT) will reach break-even by FY2028, thanks to improved operating leverage and better contribution margins.
Free cash flow to improve significantly
One of the biggest highlights of the report is Meesho’s expected cash generation.
Motilal Oswal estimates:
- Free Cash Flow generation to begin from FY2027.
- FCF to exceed 4% of NMV by FY2031.
- Adjusted EBITDA to reach around ₹4,800 crore by FY2031.
- EBITDA margin to improve to around 3.75%
The brokerage is convinced that these are steps which will greatly strengthen Meesho's balance sheet over the next few years.
Asset-Light Model Gives Meesho an Edge
Unlike many e-commerce companies, Meesho does not have large inventories or warehouses.
Instead, the platform earns revenue through:
Logistics recovery charges
Seller advertising services
Data and technology solutions
Other seller-focused services
This marketplace model allows Meesho to operate with negative working capital, estimated to be around 25 days of NMV, which allows the company to earn more money from cash float while still having a cash-rich position.
Massive User Base
Meesho has already built enormous scale in India's online retail ecosystem.
According to the brokerage:
- 274 million annual transacting users (ATUs).
- More than 2.8 billion orders processed over the past 12 months
This big customer base presents huge possibilities for monetisation in the future through advertising, financial services, and premium products.
Advertising seen as Biggest Opportunity
Motilal Oswal believes advertising will become Meesho’s largest earnings driver.
So far:
Advertising contributes nearly 3% of NMV. Sellers spend almost 9% of their marketing budgets on advertising
The brokerage expects Meesho’s advertising platform to be more widely adopted, and Meesho Mall and financial services to see a big boost in profitability over the medium term.
Margins Expected to Expand
Although Meesho's contribution margin declined to around 3.5% in FY2026 as logistics costs and higher technology investments have increased, the figure has already recovered to around 4.6% in Q1 FY2027.
Motilal Oswal expects:
- Logistics contribution to normalise
- Contribution margins to increase to almost 7.5% by FY2031.
- Operating leverage to further boost overall profitability.
- Positive Long-term Outlook
Motilal Oswal believes Meesho combines rapid user growth, improving unit economics, efficient capital allocation, and increasing monetisation opportunities, making it one of India’s strongest long-term internet platform stories.
While the near-term performance will depend on competition and general consumer spending trends, Meesho’s scalable marketplace model and cash-generating ability are expected to create substantial shareholder value in the coming years, the brokerage sees.
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