Mumbai | Bangalore: social commerce start up misho Finalizing a $550-600 million financing round, potentially led by US asset manager fidelity to truth, two people with knowledge of the matter told ET, which would more than double the valuation of the Bengaluru-based company to $5 billion from its previous round.

Misho was appreciated
$2.1 billion when it raised $300 million from the SoftBank Vision Fund in April. Facebook cofounder Eduardo Saverin’s B Capital and other investors may join Fidelity funding Sources related to the matter said.

Fidelity has been an active participant in funding rounds of several Indian tech firms, especially in the later stages. “Fidelity is expected to raise more than $100 million, while B Capital and other new investors will lose $50-100 million,” a person familiar with the deal’s negotiations said on condition of anonymity. “There may be an official announcement on this soon.”

Existing backers Japan’s SoftBank, Prosus Ventures and others will also participate in the funding round, another person familiar with the development said. The fundraising comes at a time when DealShare — another social commerce startup that specializes in groceries and essentials — also wants to rack up new funding.

Sources close to the DealShare transaction said the company could raise around $150-200 million at a valuation of $1.8-2 billion and has held talks with private equity funds such as TPG Growth.

Meesho Cofounder and CEO known atre, and Fidelity did not immediately respond to ET’s email. DealShare and cofounders Saurajendu Medda and TPG declined to comment.

Meesho’s latest grant comes at a time when it is
battling a flood of fraud and unconsented orders on its platform. Atre recently announced a series of steps – including the appointment of consultant Deloitte – to conduct a forensic audit and investigate the issue.

Meesho is a key player in India’s rapidly growing social commerce space, allowing small businesses to sell products on social media channels such as WhatsApp and Facebook, most of which are led by women.

Walmart-owned Flipkart has also
Shopsy. Introduced in this category via, which is currently less than 10% of its overall Gross Merchandise Value (GMV). Shopsy aims to enable over 25 million online entrepreneurs to be connected to the platform by 2023. It offers around 150 million products in sectors such as fashion, beauty, mobile phones and home, but will stay away from groceries.

foreign ecommerce enterprises such as
Shopee is also planning to enter India, while US-based social shopping site Poshmark recently launched here and is planning to scale up its operations.

The low-end, unbranded and long tail ecommerce market where Meesho operates is difficult to crack in India with modest margins and customers who are not clingy or loyal. An expert said that the company’s current burn rate or cash is being spent at $ 20-25 million per month to achieve users. This is considered a very high burn rate, an executive at an online retailer said, requesting anonymity.

Diversification holds the key

Meesho, which started as a platform where resellers curate products across categories like fashion, furnishing and home appliances
Extended to grocery through its brand Farmiso, which includes staples and fast-moving consumer goods (FMCG), competing with major ecommerce firms such as Amazon India and Flipkart.

“I think the frequency will come from our grocery business. And the reason it is exciting to us is that a lot of people in India, especially those in the lower-income group, spend most of their money on groceries,”
Meesho’s Atre told ET in April.

An industry executive aware of the situation said Meesho is “focusing heavily on groceries and companies like DealShare are largely due to lag behind this market”.

Apart from platforms such as DealShare, the online grocery market is witnessing intense competition from horizontal e-tailers such as Tata-owned BigBasket, Grofers, Reliance Industries’ JioMart as well as Flipkart and Amazon India.

Online food delivery platform Swiggy is also taking its hyperlocal grocery delivery business Instamart to more cities.

According to PGA Labs, the market intelligence unit of Praxis Global Alliance, the Indian e-grocery market is expected to reach $22 billion by 2025.

Meesho’s plan to target a wider base of sellers beyond its reseller base will prepare it to compete with e-commerce majors Amazon and Flipkart. This also comes at a time when the region is receiving aid from the Covid-19 pandemic.

Consultancy firm Bain & Co in partnership with Flipkart said in a recent report that online commerce will grow by 30% to around $50 billion by the end of the current financial year. ET had earlier reported that
Flipkart Group is set to generate around $23 billion in GMV This calendar year, up from $15 billion last year. Wealth management firm Bernstein said in a report that Flipkart and its fashion portal Myntra achieved GMV of $12.5 billion and $2 billion, respectively, last year.

In comparison, Amazon India earned $11.5 billion in GMV during the same period, Bernstein said.