Meesho Faces Profitability Concerns as HSBC Issues 'Hold' Rating

HSBC Initiates Coverage on Meesho With Hold Rating, Sets Target Price of ₹160​

HSBC has initiated coverage on e-commerce company Meesho with a Hold rating and a price target of ₹160 per share. The brokerage said the target implies a potential upside of about 12 percent from the current market price.

Meesho Positioned Strongly in Value E-commerce Segment​

According to HSBC, Meesho is close to achieving a dominant position in India's value e-commerce segment. The company primarily focuses on delivering low-value parcels that are generally not time-sensitive, a category that has seen increasing demand in the country's fast-growing online retail market.

The brokerage highlighted that this positioning allows Meesho to cater to price-sensitive consumers, helping it scale rapidly within the value-focused e-commerce ecosystem.

Profitability Remains a Key Challenge​

Despite the strong positioning, HSBC believes that improving profitability within this business model could prove difficult. The firm noted that efforts to expand margins may potentially slow the company’s growth momentum.

As a result, the balance between growth and profitability is expected to remain a key factor influencing Meesho’s long-term performance.

Long-Term Valuation Linked to Data Monetization​

HSBC also pointed out that the company’s long-term valuation will depend on its ability to monetize customer data beyond its core e-commerce operations. Expanding revenue streams using consumer insights could play a crucial role in strengthening the company’s business model in the future.

Lock-In Expiry Adds to Stock Pressure​

Separately, about 109.9 million shares of Meesho, representing roughly 2 percent of the company’s outstanding equity, became eligible for trading on Monday following the expiry of their lock-in period.

The additional supply in the market coincided with a sharp decline in the company’s share price.

Shares Drop After Income Tax Demand​

Meesho’s stock fell 10 percent on Monday after the company received an assessment order from the Income Tax Department. The order raised a tax demand of ₹1,499.73 crore, including applicable interest, for the assessment year 2023 to 2024.

The demand arises from additions and adjustments made by the tax authority to the company’s reported income for the period.

In response, Meesho stated that it is currently evaluating the assessment order and does not agree with the observations and adjustments made by the tax department. The company said it has adequate legal and factual grounds to challenge the order and is taking necessary steps to protect its interests.

Analyst Recommendations and Share Price​

Currently, six analysts track Meesho’s stock. Among them, two analysts have issued a Buy rating, three recommend Hold, and one analyst has a Sell call.

Shares of Meesho Ltd. closed 10 percent lower on Monday at ₹143.34, significantly below the company’s IPO price of ₹221.