Choice Institutional Equities Maintains 'Add' Rating but Sees Temporary Overhang From Potential Stake Sales

Shares of Meesho declined sharply on Thursday as investors turned cautious ahead of the company's upcoming pre-IPO lock-in expiry, an event that could significantly increase the number of shares available for trading in the market. The stock slipped nearly 4 percent during intraday trade, reflecting concerns that early investors may look to monetize their holdings after the lock-in period ends.

While brokerages remain optimistic about Meesho's long-term growth prospects, analysts believe the lock-in expiry could create short-term pressure on the stock due to the possibility of substantial secondary market selling.

Stock Under Pressure Despite Positive Long-Term Outlook

Meesho shares traded lower throughout the session, underperforming the broader market as investors weighed the implications of the upcoming lock-in expiry. The stock's decline comes despite the company continuing to report improvements in operational metrics and expanding its presence in India's rapidly growing e-commerce market.

Analysts at Choice Institutional Equities have retained their "Add" rating on the stock with a target price of ₹210, citing confidence in the company's long-term business model and growth trajectory. However, they also highlighted that the near-term risk-reward profile has become less favorable due to the impending liquidity event.

Lock-In Expiry Could Release Massive Share Supply

The key concern for investors is the expiry of Meesho's pre-IPO lock-in period on June 9, 2026. Once the restriction ends, approximately 68 percent of the company's pre-IPO shareholding will become eligible for trading beginning June 10.

The value of these shares is estimated at around ₹54,000 crore based on prevailing market prices. Such a large quantity of shares entering the market has the potential to significantly alter supply-demand dynamics in the short term.

Although not all eligible shareholders are expected to sell immediately, even a partial exit by investors could create meaningful pressure on the stock price.

Private Equity and Venture Capital Investors May Book Profits

A significant portion of Meesho's pre-IPO ownership is held by private equity and venture capital investors that backed the company during its early growth stages.

These investors have accumulated substantial unrealized gains over the years and may choose to partially monetize their holdings once the lock-in restrictions expire. Analysts estimate that if just 10 percent of the eligible shares are sold in the market, potential secondary transactions could exceed ₹5,000 crore.

Such selling activity would represent a sizeable liquidity event and could temporarily impact market sentiment toward the stock.

Operational Performance Continues to Improve

Despite concerns about the lock-in expiry, Meesho's underlying business fundamentals remain strong.

The company has continued to expand its user base, strengthen engagement on its platform, and increase participation from sellers across categories. Its focus on value-conscious consumers and tier-2, tier-3, and rural markets has helped differentiate it from larger competitors in India's e-commerce ecosystem.

The platform's ability to attract new customers while maintaining strong order growth has positioned it as one of the fastest-growing digital commerce companies in the country.

Monetisation Remains a Key Focus Area

While operational metrics have shown encouraging progress, analysts note that improvements in user activity have not yet translated into a significant acceleration in advertising revenue and monetisation.

Advertising remains an important profit driver for digital commerce businesses, and Meesho is still in the early stages of extracting greater value from its growing user base.

Brokerages expect advertising revenue growth to be gradual rather than immediate, which limits the scope for substantial earnings upgrades in the near term.

Most Positive Triggers Already Reflected in Valuation

Market experts believe that many of the company's recent achievements, including user growth, ecosystem expansion, and operational improvements, have already been reflected in the stock's valuation following its listing.

As a result, investors may require new catalysts such as stronger profitability, faster monetisation, or market share gains to drive the next phase of upside.

In the absence of such triggers, the lock-in expiry event is likely to dominate investor attention over the coming weeks.

Long-Term Growth Story Remains Intact

Despite the expected near-term volatility, analysts remain constructive on Meesho's long-term prospects.

India's e-commerce penetration remains relatively low compared to global markets, creating significant room for future growth. Meesho's strong presence in value-driven segments, extensive seller network, and focus on underserved markets position the company to benefit from increasing digital adoption across the country.

The company's asset-light business model and expanding ecosystem also provide opportunities for improving profitability over time.

Outlook: Volatility Likely Before Stability Returns

The upcoming lock-in expiry is expected to remain the primary driver of Meesho's share price performance in the near term. Investors will closely monitor whether major shareholders choose to reduce their stakes and the extent of any secondary market transactions.

While the event may create temporary selling pressure and increased volatility, analysts believe it does not alter the company's broader growth trajectory. Once the market absorbs the additional supply and uncertainty surrounding shareholder exits diminishes, attention is likely to shift back to business execution, monetisation initiatives, and long-term earnings potential.

For now, investors may continue to exercise caution, but Meesho's long-term investment case remains largely intact despite the near-term overhang.