Meesho Ltd Management Discussions

The opportunity

Indias e-commerce market is among the most underpenetrated of any large economy. It is sized at around 6 trillion (US$70 billion) in Gross Merchandise Value, just 7% of overall retail, against penetration of 34% in China, according to Redseer. This gap is a function of structural barriers in Indias e-commerce. Indias retail supply is deeply fragmented, with regional brands and unbranded products accounting for more than 70% of retail spends per Redseer, much of it sold by small sellers who have never come online. Layered on top are the barriers that keep first-time buyers offline altogether: limited trust in online transactions, language and literacy gaps, and the cost of e-commerce fulfillment in the country. The next wave of growth sits where these barriers are higher. E-commerce penetration in Tier 2+ cities is only around 4% in FY25 against roughly 14% in the top eight and Tier 1 cities as per Redseer. The same pattern holds by category. The first wave of Indian e-commerce was led by electronics, where penetration now nears 37%, while the categories that make up everyday Indian consumption remain barely online.

We believe we are best-placed to unlock this opportunity through our platform. As these barriers come down, latent demand converts into transactions. Internet users in India are projected to approach 1 billion by FY30 from 818 to 853 million in FY25, and the online shopper base is expected to roughly double, according to Redseer. A seller base of 55 to 60 million, still largely offline, is beginning to come online as onboarding and trust barriers ease. Making commerce affordable to buy and simple to access, in the consumers own language and at prices any Indian can pay, is what could turn Indias e-commerce under-penetration from a structural constraint into the largest consumption opportunity in retail.

This is the market Meesho is built to serve, and our strategic priorities are organised around the work of removing the barriers that keep it under-penetrated: fragmented supply, unaffordable pricing, and the friction that keeps first-time buyers offline.

Our strategic priorities

Our priorities follow directly from the shape of this market: a large, fragmented and under-penetrated opportunity where affordability and accessibility is the lever that unlocks demand.

a. Grow the consumer base and transaction frequency by widening assortment and the seller base: Our aim

is to democratise internet commerce for every Indian consumer, whether a high-income urban shopper or a first-time rural buyer. We will keep widening assortment by onboarding a broader base of offline sellers, simplifying onboarding, reducing operational friction ^0 for sellers new to e-commerce and building trust.

b. Deepen affordability and accessibility: Affordability is what converts first-time e-commerce users into habitual users. We will continue to make selling on Meesho affordable and accessible through technology- led operating efficiencies and continued optimisation of our platform. Lower seller costs and easy-operations translate into more competitive pricing and broader assortment in the low-ticket, high-frequency categories that define Bharats demand.

c. Invest further in technology and AI: Technology is how we scale while keeping costs low. Through Meesho AI Labs we are building India-specific AI models for personalisation and product discovery, deploying agentic AI across the shopping and post-order journey, strengthening transaction risk management and improving advertising effectiveness for sellers. Alongside, we are building logistics and content-creator systems purpose-built for a low-cost environment, and expanding cloud infrastructure to handle higher volumes and peak demand. With the growing need to make e-commerce platforms more intuitive and assistive, helping customers discover the right choices, navigate products easily through best-inclass recommendation systems, and make purchases easier, Meesho has made significant developments across each of these phases.

• Our Product Ranking/ Recommendation System:

In 2026, ‘PRISM (Personalised Ranking and Intent Signal Module), our recommendation system, continued to widen the accessibility moat through deeper feeds, intent-aware ranking and ‘Trendpu lse our LLM-powered proactive discovery engine to identify regional and upcoming cultural trends.

• AI Shopping Assistant: A full stack investment across accessibility, trust and transactability drove higher conversion for new consumers, enabling us to accelerate our ATU growth. Vaani, our AI shopping agent launched in Q4FY26, extends Meesho into agentic, voiceled conversational commerce for vernacular cohorts and first-time E-commerce consumers. Vaani crossed 1.5M users in the first month and delivered a 22% conversion lift for users who adopted.

• AI Voice Agents: Chorus, our Voice AI agentic platform, deployed agents to guide sellers through Meesho promotional and sale events, have driven higher adoption and created fresh growth opportunities for sellers on our platform. GenAI seller voice agents currently handle up to 300k calls per day, autonomously guiding sellers through their participation on the platform. The result is stronger seller adoption, higher event participation, and new growth GTMs unlocked across the platform.

• Address Intelligence: Geo-India LLM, our proprietary AI model trained on millions of real delivery traces across thousands of pin codes, encodes neighborhood connectivity the way a local delivery person understands it. For millions of first-time e-commerce users in India, addresses are landmarks, local references, and vernacular descriptions that conventional geocoding systems cannot parse. GeoIndia converts vernacular, landmark-based addresses into precise coordinates. Every corrected address feeds back into the model, compounding accuracy over time. In the last year, GeoIndia LLM improved geocoding accuracy by 20 percentage points and reduced misroute-related costs by 5 percent. Our research on GeoIndia LLM was published at CIKM 2025, where it outperformed industry standard commercial geo-coding systems across all evaluation metrics.

• Trust & Safety: TrustMesh, our deep learning integrity model, reasons across user behavior, their shared identities and their network relationships to detect abuse, predict return-to-origin before dispatch, and flag quality issues across 166 Mn active listings in real time. At population scale with billions of product impressions, maintaining integrity through manual review is not economically viable. In FY2026, TrustMesh blocked c.9 Mn high-risk transactions, and restricted c.2 Mn consumers and c.62K sellers. Since deployment, TrustMesh has reduced RTO by >10%. Our research on large scale deployment of TrustMesh was published at AAAI 2026.

• Route Planning: Network Intelligence System (NIS), our ML-powered route planning system, optimizes truck allocation, route sequencing, and delivery timing simultaneously. NIS reduces cost per delivery by optimizing packet routing, continuously learns as network conditions evolve, and improves logistics efficiency as delivery volume grows.

Over 70% of our code is now AI generated, and we are releasing products faster and with greater reliability than at any point in our history. We are still accelerating with advances in AI and removing barriers that kept several hundred million Indians from participating in internet commerce: language, digital literacy, and operational complexity.

All the above initiatives are on the back of BharatMLStack, our in-house ML platform which runs at 60%-70% lower inference and AI workload costs than equivalent cloud services.

d. Horizon 2 Growth Initiatives: Through our structured approach to innovation, which we call ‘Horizon 2 Initiatives, we experiment with new opportunities, test the product market fit, its ability to grow and assess unit economics before further investment. This allows us to pursue initiatives that are scalable and strengthen our core business while driving long term value for our stakeholders and us.

Consolidated Profit and Loss Account (Year ended March 31, 2026 compared to Year ended March 31, 2025)

Marketplace NMV grew 38.6% to 1416 billion in FY26, reflecting deeper consumer engagement and continued penetration into value-conscious, high-frequency consumption categories on the back of increase in Annual Transacting users and frequency which drove the placed order.

LTM Free Cash Flow for FY26 was -1633 Cr, or -1.5% of Marketplace NMV, compared to +1591 Cr, or +2.0% of Marketplace NMV, in FY25 because of our deliberate choice of increased investments in user acquisition and growth initiatives while simultaneously navigating temporary logistics-related headwinds.

Contribution Margin - Marketplace was 114,431 million in FY26 compared to 114,837 million in FY25. The YoY compression was primarily driven by the rapid scale-up of the Valmo network in Q2 and Q3 FY26, following an industry-wide 3PL consolidation. We expanded the network by onboarding partners and deploying additional nodes to ensure a seamless experience for consumers and sellers, with Valmos asset-light model allowing us to respond quickly without significant capital investment.

Key Consolidated Financial Ratios

inventory turnover ratio, Debt equity ratio and Interest coverage ratio have not been disclosed, as the group does not have inventory and borrowings.

Trade receivables turnover ratio: The trade receivable turnover ratio quantifies the companys efficiency in collecting its trade receivables. It measures the frequency with which the companys receivables are converted into cash during a specific period. This ratio is computed by dividing revenue from operations by average trade receivables.

Current ratio: The current ratio is used to evaluate the companys liquidity position and is calculated by dividing its total current assets by current liabilities, including current debt.

Operating profit margin: Operating profit margin represents the Earning/(loss) before interest, tax and depreciation and amortisation expense as percentage of revenue from operations.

Net profit margin: The net profit margin, also known as the net margin, measures the net profit/ (loss) generated as a percentage of revenue from operations.

Income

Our Revenue from operations increased by 34.47% to 1126,263.48 million in the year ended March 31, 2026 from 193,899.03 million in the year ended March 31, 2025, primarily due to an increase in our Segment revenue - Marketplace. Segment revenue from Marketplace grew, led by higher seller revenue on the back of increased Placed Orders and greater uptake of seller services.

Our Other income decreased by 7.49% to 14,727.13 million in the year ended March 31, 2026 from 15,109.98 million in the year ended March 31, 2025, primarily due to decrease in Interest income on bank deposits, bonds, certificate of deposits and commercial papers.

Employee benefits expense: Our Employee benefits expense increased by 7.55% to 19,121.96 million in the year ended March 31 2026 from 18,481.81 million in the year ended March 31, 2025, due to increase in Salaries, wages and bonus which is offset by decrease in employee share based payment expense. The increase in Salaries, wages and bonus was due to an increase in the total number of full-time employees from 1,656 as of March 31, 2025 to 2,078 as of March 31, 2026 to support the growth in our business. The reduction in Employee share based payment expense is due to accelerated vesting of options held by Promoters during Fiscal 2025 combined with the impact of increased attrition at senior management level during Fiscal 2026.

Finance costs: Our Finance costs increased by 29.99% to 189.63 million in the year ended March 31, 2026, from 168.95 million in the year ended March 31, 2025 due to an increase in Interest on dues to micro and small enterprises and others.

Depreciation and amortisation expense: Our Depreciation and amortisation expense increased by 37.60% to 1468.21 million in the year ended March 31, 2026, from 1340.27 million in the year ended March 31, 2025 due to increase in Amortisation of intangible assets and Depreciation on right- of-use assets.

Other expenses: Our Other expenses increased by 44.73% to 1131,992.63 million in the year ended March 31, 2026, from 191,202.27 million in the year ended March 31, 2025 due to following expenses:

• Logistics and fulfilment expense:

Our Logistics and fulfilment expense increased by 42.23% to 1104,566.12 million in the year ended March 31, 2026, from 173,520.77 million in the year ended March 31, 2025, due to the increase in the number of Placed Orders, resulting in an increase in payments made to logistics partners

• Advertising and sales promotion expenses:

Our Advertising and sales promotion expenses increased by 73.97% to 111,195.72 million in the year ended March 31, 2026 from 16,435.26 million in the year ended March 31, 2025. This increase was driven by an increase in consumer acquisition and retention related spending, along with increased payments made to content creators under our content commerce initiatives.

• Server and software tools expenses:

Our Server and software tools expenses increased by 51.58% to 19,391.17 million in the year ended March 31, 2026 from 16,195.61 million in the year ended March 31, 2025 due to growth in both user engagement and transaction activity on our platform, which required us to incur increased expenses to scale our technology infrastructure to support higher traffic, engagement, and content-led transactions.

• Contracted manpower:

Expenditure on contracted manpower rose by 42.14% to 11,492.66 million during the fiscal year ending March 31, 2026, compared to 11,050.12 million in the year ended March 31, 2025. This growth was mainly attributable to a higher headcount of off-roll personnel to facilitate seller base expansion, improve seller support, and strengthen consumer services. Additionally, the increase reflects the recording of leave encashment and gratuity liabilities for contracted staff in compliance with updated labor regulations.

• Communication expenses:

Our Communication expenses which includes call centre and messaging costs, increased by 27.08% to 12,880.53 million for the year ended March 31, 2026 from 12,266.76 million, due an increase in the number of Placed Orders and related support services provided.

Exceptional Items

We incurred a one time exceptional expense of 11,410.91 million during the year ended March 31, 2026, which is related to costs incurred for the reorganisation of our Company and Full and final settlement in respect of vendor dispute.

Tax expense

We had a Current tax of 1 786.39 million and Current tax on account of business combination of 1698.26 million for the year ended March 31, 2026. We incurred a one time tax expense - Current tax on account of business combination of 124,868.42 million in the year ended March 31,2025 for the reorganization of the Company and Current tax on account of business combination in the year ended March 31, 2026 is on account of foreign exchange fluctuations and finalisation of the tax obligation.

Loss for the year

As a result of the foregoing, our Loss decreased by 65.55% 113,577.38 million for the year ended March 31, 2026 compared to the loss of 139,417.05 million for the year ended March 31, 2025

Non-GAAP Financial Measures

In addition to our results determined in accordance with Ind AS, we believe the following non-GAAP measures are useful to investors in evaluating our operating performance. We use the following non-GAAP financial information to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively with financial measures prepared in accordance with Ind AS, may be helpful to investors because it provides an additional tool for investors to use in evaluating our ongoing operating results and trends and in comparing our financial results with other companies in our industry because it provides consistency and comparability with past financial performance. However, our management does not consider these non- GAAP measures in isolation or as an alternative to financial measures determined in accordance with Ind AS.

Non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation

or as a substitute for financial information presented in accordance with Ind AS. Non-GAAP financial information may be different from similarly titled non-GAAP measures used by other companies. The principal limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by Ind AS to be recorded in our financial statements, as further detailed below. In addition, they are subject to inherent limitations as they reflect the exercise of judgement by management about which expenses and income are excluded or included in determining these non-GAAP financial measures. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure prepared in accordance with Ind AS. Investors are encouraged to review the related Ind AS financial measures and the reconciliation of non-GAAP financial measures to their most directly identifiable Ind AS financial measures included below and to not rely on any single financial measure to evaluate our business.

EBITDA and Adjusted EBITDA

EBITDA is calculated as Loss for the year plus (i) Finance costs,

(ii) Total tax expense, and (iii) Depreciation and amortisation expense for the given year.

Adjusted EBITDA is calculated as EBITDA plus (i) Employee share based payment expense, (ii) Exceptional items, and

(iii) Fair value loss on derivative instruments at fair value through profit or loss, less (i) Interest income on bank deposits, bonds, certificate of deposits and commercial papers, (ii) Interest income on security deposits, (iii) Gain on sale of current investments (net), (iv) Gain on liquidation of a subsidiary, (v) Interest on income tax refund, (vi) Net gain on disposal of property, plant and equipment, (vii) Fair value gain on derivative instruments at fair value through profit or loss, (viii) Fair value gain on investments at fair value through profit and loss, and (ix) Exchange differences relating to disposal of a foreign subsidiary.

Reconciliation from Loss for the year to EBITDA and Adjusted EBITDA