Meesho Limited (MEESHO) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Misho Q4 FY26 Earnings Call. As a reminder, all participants' lines will be in the listen-only mode, and there will be an opportunity for you to ask questions. Should you need assistance during the conference call, please signal an operator by pressing Start and Zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Nilesha Bhavira from Citi. Thank you, and over to you, ma'am.

Thank you. On behalf of Citi Group, I would like to welcome all the participants to the Q4-FI26 conference call of Misho Ltd. I would like to inform you that the call is being recorded, and the audio call and the transcript will be available on the company's website. Joining us today to discuss earnings for the fourth quarter and FI 2026 are Vidit Atre, Chairman, Managing Director and Chief Executive Officer, Sanjeev Kumar, Full-Time Director and Chief Technology Officer, Diresh Bansal, Chief Financial Officer, and Karthik Chandrasekhar, Head Corporate Development and Investor Relations. We encourage investors and analysts to review the shareholder letter available on Misho's Investor Relations website. During this call, management will focus on addressing questions beyond the topics already covered in the letter. Before we begin, please note that certain statements made on this call may be forward-looking in nature and should be considered in conjunction with the risk factors disclosed in the company's filings. With that, we can open the floor for questions.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask the question may press star and 1 on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from the line of Sachin Selvalkar from BOSA. Please go ahead.

Thanks for the opportunity. I have a few questions. First question on Malmo. Now that the one-off issues are behind and the network looks optimized, how is management thinking about the mix between insourcing and outsourcing? I think you guys are currently roughly at 50-55% insurances. Where do you see this number moving in the medium term?

Yeah, hi, this is Vidit. So I think, I think we have mentioned before, we do not take a specific goal of how much Valmo share should be. We will continue to give volumes to the pair who is the most cost efficient for every name. We see third party logistics partners also compete on this across the board. So we generally don't take a goal. Our goal is more customer backward of continuing to make all our products more and more affordable to them. We believe, like as Bagmo has done in the past, it will continue to kind of innovate and improve the cost structure, and as that happens, the share will keep increasing. We do not take a specific goal in terms of what Bagmo OC share should be in the short to midterm.

When we look at some of the global operators, be it Mercado, Libre or Shopee, all of them have taken a conscious call of focus on insourcing because they could benefit on the back of Backstream. Is there some kind of a thought process in similar lines for you guys?

So, which is already happening in Vatma. I think that's a big reason we have started because in many places we get much better cost efficiencies working with Vatma as compared to any other player. And that is across the board. I think consolidation slash batching, what do you mean? Even that happens. That means scaling. But many other cost efficiencies come into our supply chain as we have scaled it. So I think we take the same POV, actually. Wherever we are able to get the best ROI, we end up basically using that particular partner. And we'll continue to work with third-party logistics partners for this.

Second question, as we head into next fiscal, how should we think about your investments in new user acquisition, which is pretty high in FI26, but now that your wealth AI shopping agent is running well and there are other AI-led investments to acquire customers, should we expect this acquisition investment to meaningfully come down?

So actually, we do not again take a specific goal on what should be the advertising spend. Historically, we've always taken as long as our investments meet a certain

return threshold, we continue to invest. So, we continue to basically do innovation so that our return investment on marketing continues to improve. So, we saw that in Bali, we were able to convert

more rural customers on our platform. And because of that, our CAC went down and we plan to basically invest a lot more in acquiring rural customers over the next 20 years. So I think that's basically the approach we take. Overall, I don't think that approach will change at all.

We will continue to decide what should be the return on investment threshold for marketing at all times in time. And as long as we're meeting it, we will continue to invest. If you look at overall, we also mentioned in the letter. India is quite low in terms of number of people who are transacting online as a percentage of smartphone users, even in other emerging markets, that number is north of 80%.

I'm not even comparing with the dressing markets. India is closer to 30%. And that's why, even at a large base, we are able to grow our annual contracting reserves at 33% YOY. So we believe there's a large group there. So as we keep innovating on our product and our return on investment continues to be attractive, we will keep acquiring these new reserves aggressively. I'm pretty clear on that. Third question, given the fact that we saw enough

sharp margin improvement and add as a percentage of NMD continues to improve. Would management look to give some kind of a guidance when the company could be a bit of a breakeven? Because directly one looks like, you know, it is not far off from users being a bit of a breakeven. And separately, the same comments on free cash flow. Last year, you know, looked one-off in terms of your investments, which had gone into logistics network. But now with most of these issues behind, is it fair to assume the issue will be free cash flow positive with fiscal?

Yeah, hi, this is . So in terms of, I think, guidance in the short term, we don't have any specific guidances to share at this point on EBITDA. I think LDMFCF, which you rightly kind of pointed, has been the guiding sort of line item there. We will have, in fact, over a 12-month series. So anything that we have, for instance, in Q2 and Q3 of FY26 will continue to last for some time, and hence there will be a consequential impact of that being carried over for the next few quarters as well. But from a trajectory standpoint, both with the improvement in margin that we are seeing as well as growth that we are seeing, our FCF overall, you know, on a quarterly basis should keep on improving.

And my last question is based on one of your comments from shareholder letter, where you guys mentioned about macro environment when it is unfettered and consumers focus more towards value. I guess this is equally true for mid to high end users also. So is there a bit more focus from you guys to focus on brands from the niche mall, more to target more affluent users apart from the value commerce users?

Yes, so I think that we are scaling Nisho Mall for affordable brands, or I would say value brands or value packs of all the brands that you know. So I think, and we've been wanting to promise to the last one here, a lot of natural brands that are popular in India have scaled their selection

on Nisho and they find that they're able to reach. A customer for the first time that they could not reach earlier, and sell selection online for the first time that they could not sell earlier.

So, everyone is seeing a lot of potential there. So, it's going to be a bit focused for us. Nisho Man is not just focused on the premium customer. I think it's going to be focused on anyone who cares about value. So, it's going to be mass in there. We still believe the large opportunities like serving brands for a billion Thank you very much. It's not just for the big cities. I think a lot of people who want to get access to national-owned brands, regional brands, new upcoming D2C challenger brands, and all of them have generally struggled to reach these consumers in mass India because the typical distribution networks were Kirana, GT, that were hard to access for majority of brands in India. We are basically offering that proposition and a lot of people are excited. So we are going to continue to focus on malls for Mass India, not just on PM customers, and so far we are seeing very, very good signs there.

Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants, we requested to please limit your question to three per participant. The next question is from the line of Gaurav Mahhotra from Access. Please go ahead.

Hi, thanks for the opportunity and Sonras on a good set of numbers. Just like two questions. One is in the shareholder letter you mentioned about the COD being almost having reduced to a good extent. So just wanted to get some sense on the BNP initiative and how much is that helping the reduction in COD?

Yeah, I think BNPL is still fairly early in its life cycle. So I think right now the key initiatives that we have had within our prepaid product, which is payment before delivery, I think the cost of prepaid orders kind of coming down and passing consequentially some of them back to our consumers with better prepaid discounts, et cetera, have been the driving force so far in terms of cash flow. Restaurant delivery share coming down or people share increasing. Going forward, as we kind of continue to invest behind the NPL and we're seeing good sort of energy science there, that will become a driver, but at this point in time, it is more direct potential kind of increase.

In terms of the ad spend, you mentioned that in the letter that Grace, there's a decline in CAC. Is it because, like you mentioned in the previous comment, is it because there are more rural customers coming on board which is helping reduce CAC, or is there something more to it?

Yeah, so I think the CAC reduction is happening due to the investments that we have done historically in terms of technology, in terms of improving the value proposition from a price perspective as well. What's this kind of rural users? In fact, I think as you go deeper into India, on a like-for-like basis, tax only go up because you have to convince a certain user more in order to come back. But with new improvements and products that we have made through AI and otherwise, that barrier threshold has come down. So Vani, for instance, our voice agent, or other investments that we've done in terms of algorithms as well, Have reduced net friction between a user installing the app and placing their first order, and that's the reason why CAAT continues to be in a fairly limited zone.

In terms of logistics costs, you know, obviously, there's a long term of declining, if you can give us some sense on any near-term initiator, we are seeing something, you know, something which can be measured, which is actually leading to some significant or meaningful reduction from wherever we are today?

Yeah, I think there's no quantitative sense that we'd be able to provide, but broadly speaking, I think if I have to kind of share some of the key drivers there, one, I think, which we briefly touched upon, the movement from cash and delivery to prepaid transactions has been improving the cost structure that we have. Again, given both the cost of serving a patron delivery order itself is higher with cash handling charges, but also the delivery rates for pre-paid orders are better than that kind of leads to better total cost optimization for pre-paid orders. Second, as our volumes increase in the ecosystem, that density increase across the board, the last mile, the middle mile, all the legs, also leads to cost improvement. And again, this happens in Valmo as well as with our partners where we are able to see cost improvements. In addition, I think we are kind of doing multiple innovations within Valmo, which we continue to kind of roll out, and those over a period of time will give us cost goodness. At this point, Thank you very much.

Just one small quick question. Can you give us some sense on the salience of MLB across the various cohorts? In the top cohort, if you can give us some sense on the frequency as well, versus the 10 that is there at an aggregate level for the business?

Sorry, could you clarify the question? What do you mean by the top cohort?

So in the sense you have given us some numbers in terms of, you know, how much is the NMV salient across, you know, users who have been in the system for FI24 and before and FI25 and also let's say the top cohort, FI24 and before, what kind of frequency would they be having, say, versus system average?

Yeah. So, I don't have the specific number of frequency off the top of my head, but in general, I think as users kind of mature on the platform, the frequency in almost a three-year time period starts going up to 15 times or more. So, I would suspect, I think, for the FI24 and the FI4 cohorts, it will be a similar number.

Thank you so much.

Thank you. The next question is from the line of Gorda Vateria from Morgan Stanley. Please go ahead.

Hi. Thanks for taking my question. Congratulations on good performance on EBITDA. I have a couple of questions. Let me just read out all of them in order to just be more efficient. My first question is on monetization. When I look at the revenue number on the marketplace and look at it on a per-order basis, It doesn't seem to have moved on a quarter-on-quarter basis, whereas the NMV has grown. So why monetization has come down, whereas our ads contribution should have increased during the quarter? The second is on your comment on 145 basis point, one-time impact. Should one assume that this is not going to be there next year, and hence it will be a straight flow through to the EBITDA numbers from next year profitability perspective? The third is the logistics issues that you talked about, which kind of, you know, impacted your performance. What have you done or what are the initiatives that you're thinking in order to make sure that the business does not see any such issues in future and become more resilient? Thank you.

Thanks for the questions. So I'll pick up in the order itself. The first question was why has monetization come down or has there been any change in the trajectory of ad revenue? So I think broadly we've seen uptick in terms of overall ad revenue as percentage of NMD within this quarter versus the previous quarter. There has been a change in terms of how Reported revenues are kind of being accounted for. Earlier, we used to provide the revenue gross of discounts for the first orders and then have the cost in the saving marketing expenses, which is kind of now being netted off against revenue. And the second one is around the prepaid mix or share, which has also kind of been increasing. And typically, prepaid holders will have lower revenue, but also lower cost. So from a contribution margin perspective, they will be net neutral. But from a revenue line item perspective, it might impact some of the QOQ trends. That's, I think, the primary reason. Apart from that, I think if I can specifically look at ad revenues itself, that has been on an uproar. The second question, I think, was around the mentioned in the letter around one-time logistics headwinds. So just to kind of recap, most of this headwind was during the Q2 and Q3 period of Fi26. From there, we have kind of recovered. So that one-time logistics disruption This question is kind of behind us, and hence, going forward. I think the third one was around logistics issues. So, like we've mentioned, the impact that we had during Q2 and Q3 of Fi26 was transient in nature, primarily caused by some amount of capacity. Somewhere around May last year. And in order to ensure that our customer experience doesn't suffer and consumers are continuing to get their orders, we ended up doing some short-term kind of capacity. Now, most of that capacity has been unwinding. Thank you. All the best.

Thank you. The next question is from the line of Pratik Maheshwari from HSBC Securities. Please go ahead.

Thank you so much for the opportunity. I've got three questions. So first one is on frequency. So as you said, probably the cohort, which are from 24 or before, are around 15 times, right? But I would make that probably the new users are coming at frequency of 5 or more. Probably the mid-50% of the users are at frequency of 5 to 8 times, right? So we just want to look at that as the platform is growing, right, users are probably reaching users more ridden or interlamps, right? The general assumption is that the frequency probably of these users will be lower versus the users that we would have initially taken up in the platform. Would that be right? And in that context, how much do you think the frequency can go up to probably a little more midterm, three to five years perspective? That's my first question.

Sure.

So actually, counterintuitively, and again, because of all the changes that we have been doing in terms of pricing, assortment, the technology innovations our team has been doing. First-year frequency has been on an increasing trend for the last three years now, so new users which get acquired on the platform start from a higher baseline now versus what they were at, say, three years ago. Almost a doubling of frequency has happened from a baseline perspective in the last three years, and that is a trend which is more Show them offsetting any potential. Let's say, socioeconomic impact that we might see when it comes to us going into deeper parts of India. Just to kind of zoom out, again, we are still a very small proportion of consumption of consumers in India. If you look at frequencies of comparable sort of value-focused e-commerce companies in China, those would be closer to almost 100 times. So I think there is a lot of space to play. Continue to make our price proposition better, our relevance algorithms better, and hence, users are able to discover a lot better things in their first sort of year itself versus what they were doing earlier. And again, with propositions around more content commerce, et cetera, and so getting introduced and leading to more transactions, that also leads to Thank you.

The second question that I had was on some of the announcements, some of the comments that probably the end-to-end by just partners that they make, right? So, basically, there's been some consolidation industry in the past one year, and now the focus from them seems to be more on margins rather than probably changing volume and probably offering better rates, right? So in that context, and since also probably if they do not offer you more capacity or better rates, probably Valmo will keep scaling up. So in that context, do you see the firm making probably investment into midmine as well for the certain centers? Because what will happen is when you look at the smaller partspans in your Valmo network, probably they will not have the capacity to make large investments to improve the midmine cost. So, in that context, Danmo keeps scaling up new things, and they'll be making good decisions, and sorting and cutting topics.

Yeah, I think just splitting both. First, we believe that all our third-party logistics partners make money when they serve awareness. So I don't think there's any incentives for anyone to not work with us. And historically, that's always been the case. We work very closely with all our partners, and it's always been a win-win relationship. Now, second, within Balmo, will we bring a lot more automation within SORT centers? I think the answer is yes. That's a big focus area for us. We're already, like, for example, experimenting with it in several places, and our goal is in the next few years to basically bring state-of-the-art automation within all our sort centers. So I think that we will do, and that will lead to a lot of efficiency for us in the coming years. So that's going to happen in a sector.

And with this last question, I want to ask them. So as you said, Rami helped you guys reduce the pack, right? And so should we assume, and you said probably this year would have the trend of either larger additions in the remaining mags, right? So from that perspective, should we see the 4Q ELT number as a rebase line where you should think about the ELT spend for this year?

I think, as Will had mentioned earlier, like, the way we kind of approve sales and marketing spend is not located as a budget in terms of percentage of NMP. We look at what is the return that the spend is generating, and as long as that spend is generating above our sort of And I'll see you in the next slide. Then we kind of continue to invest in terms of growing our market because we're still at a very decent stage of the market. So the investment philosophy is on that basis. Now, where we are today is as our base of NMV will keep growing, the user spend may not kind of scale at that same amount, but that is a longer term trend, I would say, versus specific quarterly kind of trends. Thank you. Scale up or down depending on the opportunities that we see.

Okay, thanks so much.

Thank you. The next question is from the line of Aditya Suresh from Macquarie. Please go ahead.

Yeah, thank you. Good evening. Two questions. The first is on contribution. So you've seen that sequential 130 basis points improvement in contribution margin. A lot of that is done to logistics, done by 110 basis points. And this has come as you scale back your insourcing push. So I guess the real question is that if free cash flow is your north star, then why not say, for example, further push down insourcing, right, to say from 50% down towards 70% with kind of the objective of kind of further expanding CM, free cash flows, et cetera. So that's the first question. The second question is on cash flow from operations, particularly. In absolute basis, the scale of that negative number has expanded quarter and quarter for the past three quarters now, and even if I kind of zoom into this specific quarter, you've seen that that cash flow operations further go negative, even as you've seen that margin improvement, whether it be at the CM level or that adjusted it at the margin level. So if you can just square that for me, please. Thank you.

Sure. So I think on the first question, which is in relation to, hey, should we kind of change the insourcing mix further? I think, again, we are optimizing for overall cost. So at this point in time, the cost structure kind of solves for this number. And again, there are improvements that we keep doing, innovations that we keep doing in value. As also other 3PL partners keep kind of... Competing to sort of give better pricing as their volumes go up, etc. So I don't think there is a specific number that we aim for. At this point in time, at 50%, we were the most, or at around that mark, we were the most optimized in terms of cost structure. And our belief is as things keep kind of changing, we keep kind of adjusting. This is the cost reality that we see. I think on your second question, cash flow from operations. So again, the trends that you're looking at may include certain one-offs that have been kind of there from past periods or within past periods. But if I kind of look at the overall EBITDA trend as well as the credit period or negative working capital cycle that we've had, we have been on an improvement trajectory overall on a CFO basis as well. We can share a reconciliation on what changes are.

Yeah, that'll be fantastic. Thank you.

Thank you. The next question is from the line of Ayesh Garg from CLSA India Private Limited. Please go ahead.

Hi. Good evening, Mr. Bhattacharya.

I'm sorry to interrupt you, Mr. Garg. We are unable to hear you clearly, sir.

Hello.

Yes.

Can you hear me? Yeah. Yeah. Hi. This is Aditya from CLSA. So just a quick one. So we, following on from the previous question, so we also saw a reduction in the cash balance in the quarter. So the cash balance has come down by about 300 crores. So two questions on this. So one, why has the cash balance reduced so much when the margins improved? And second, I think there's some reclassification of the cash itself, where I think income tax assets are removed from the cash burden. So again, if you can just throw some more light on this.

Sure. I think the cash balance movement typically happens because of end of quarter NMV numbers. So let's say in a quarter where there is more, I would say, sale or NMV, which is coming in the last sort of 15 to 20 days of the quarter versus, let's say, a subsequent quarter, then we see this kind of volatility that typically happens in terms of Cash flow for the quarter. And hence, we have kind of always maintained that in our business, looking at LTM, FCF, the last 12 months, FCF, is a better way to kind of judge the trajectory versus looking at quarterly cash flows. So, for instance, if in a quarter we have a sale event during the last 15 days, our NMV will increase and the cash balance will kind of go up significantly versus if that event is kind of In earlier part of the month. So some of this volatility gets smoothened out when we look at LTE and FCF trends. I think in terms of taxes, so some of the taxes that have been kind of paid out in terms of cash payout, those we expect to be funded back. This is the trajectory of our sort of overall profit NPVT, and hence that's been kind of adjusted off from our net cash balance.

All right. Yeah, that's clear. Thank you so much. That's it for me.

Thank you. The next question is from the line of Garima Mishra from Kodak Securities. Please go ahead.

Hi, thank you so much for the opportunity. I have one question on your revenue line itself, right? If I just compute a revenue per order, this number has declined from, let's say, 57 rupees odd in FY24 to 47 rupees odd in FY26. A lot of the decline is, I think, explained by the decline in your logistics cost. Plus, you know, some of the accounting changes that you highlighted earlier. My question is, going forward, as we try and focus more on getting more income from advertising, should this number sort of stabilize from here on, or at least the decline should not be as much as what we have seen in the past? Is that the right way to think about it?

Sure, Darima. So, I think from our business standpoint, the right number to consider from a trajectory standpoint is contribution margin. Because, as I was explaining earlier, for instance, things like prepaid versus cash on delivery orders. Now, if you start getting a higher mix of prepaid orders, which is fundamentally good for the platform, you would see that the available order would kind of decline. But the contribution margin would sort of remain the same because Again, the lower cost of serving a prepaid order is what we kind of pass back to our consumers in the form of low pricing. So, hence, looking at revenue per order as that trend line may not be quite instructive versus looking at contribution margin. And then, because ad revenues largely kind of do not have significant cost associated with them, As our ad revenue will keep improving, the revenue or the contribution margin would also kind of mimic similar trends across. I think the only difference we had in FY26 was some of the margin that we made on our deployment came down, which we are now sort of restoring back.

So my only point was that I completely take your point that versus the logistics revenue, there's also a logistics cost. And if both go down, the revenue line optically would look weaker, which is fine. But if revenue monetization from ads goes up, you know, that's straightaway in addition to the revenue line, right? So just from optics perspective, that should kind of... Make good any large revenue decline that happens on account of logistics, I think. That is what my understanding is.

Given ad revenue is a very high gross margin business versus logistics is a lower gross margin business. They are quite different when it comes to just simple sort of revenue addition. So it may not be true that, let's say, in fact, what might be true is that the logistics revenue might come down sharper versus kind of ad revenues increasing. But on a contribution margin line, you would continue to see improvement.

Sure, understood. And the last question for me, again, on advertisements. Could you just highlight what is the kind of response you're seeing from your merchant partners? What is the kind of ROAS and the ad loads on the platform that you are seeing? And, yeah, any other efforts to improve ad monetization that are underway? Thank you. That's it for me.

I think we spoke about it last call as well, and our trends here continue to be encouraging. A lot more of our sellers continue to get activated on our new ad product, which kind of is ROAS backwards. Our return on ad spend continues to be one of the industries that's, in fact, multiple. So what other e-commerce players kind of offer in India or anywhere else in the globe. From a seller adoption point of view, the number of catalogs or products which are now live on kind of ads has improved. By the way, this is... 40%, but even on a QOQ basis, continues to see improvement. And that is the key input that eventually goes into a lot more kind of competition in terms of ads and hence higher ad revenues for us. So that trend continues to be on. I think, again, we have measured about how quickly we want to kind of wrap some of these items.

Thank you. The next question is from the line of Abhishek Banerjee from ICSA Securities. Please go ahead.

Yeah, thanks for the opportunity. Just a couple of quick questions for me. First, do we, so I think you mentioned that you want to do more automation in the mid-mine. So you wanted to understand that does that mean you will actually spend on CAPEX or how do you kind of plan to do that?

So, I think we haven't, let's say, pinned down a specific model. We continue to, kind of, see pretty good encouraging results from some of our partners who would want to, kind of, invest and set up some of these facilities on our behalf, but, again, basis, payback, period, math, and other things, we can take a call if, let's say, any investments are required from our side itself. So, again, some of this we'll discover as we kind of go.

Okay, understood. And second, on the ROS part, now, of course, the ROS numbers that you kind of get is significantly higher than what any of your competitors do. But the point is, that should actually make it easier for you to kind of push through pricing a little more. Now, I'm just trying to understand, is there a trade-off which we are now operating at, or what is the proportion of, you know, ad-related listings that you want to get to before you want to push pricing? You could, you know, just give us some color on that. That would be really helpful.

Yeah, so I think the big focus area for us at this point in time, the reason we've been operating at very high ROS is because we've been focused on activating more and more sellers on our ad product. So a big focus area for some time will be just making that happen.

Because as soon as, like a lot of people are becoming advertisers for the first time on a platform, and if they become advertisers,

and they get very good ROS, The chances that they will spend more on the platform and put more budgets end up being much, much higher. So I think that's the stage we are in. You are right. At some point in time, we will start to take pricing up to grow our revenue. We just want to be sure that we are doing it at the right time so that our steady-scale ad revenue is much higher than what we have today.

Understood. Just one continuation on that. So I'm sure you have the ability to kind of single out one seller who has been using advertising for some time now. And you can, you know, kind of make those kind of portails and start charging a little on that. So have you tried any of those experiments? You kind of seen how the propensity to advertise kind of changes with pricing?

So I think a better way, we can't charge differently to different sellers for ad products, it's a bidding product. So people decide. But what happens is, a good way to see is that people are putting a large budget. So if I get good ROAS, am I putting a much larger budget? And we today see that the budget over the last one year for us has grown more than double, much more than double over the last one year. So more people have put budget basically theirs. We want to spend a lot more on the platform. I think that's, that's basically a signal to see whether people like the product and want to invest over time. And as I said, at the right time, we will start to clear the pricing and start to grow this area.

Thank you. Very happy.

Thank you. The next question is from the line of data shop from Airbnb Spark Institution Equities. Please go ahead.

Thanks for the opportunity. On the runway to add users that you highlighted, if you were to look at this base of 264 million users through a household lens, what would that translate to approximately?

I think given, again, in India, people kind of look at or input addresses very differently than people within the same household. It's hard to kind of guess a specific number of how many households are being served. I think, again, the view here is e-commerce shopping, especially of the kind and categories that we serve, is done more on an individual basis versus kind of household basis. This is less of grocery shopping but more sort of browse-based shopping, where the feed algorithms that we have, they are personalized for each user, and hence the likely overlap between users kind of using a single sort of device to place orders through the show is relatively less. We also see this when we kind of look at other markets, China, Southeast Asia. That the number of e-commerce transactions largely kind of mimics the number of, say, WhatsApp, WeChat, users, et cetera, that are there in those markets. So shopping, e-commerce shopping is more difficult in nature, and hence household is not the right way to kind of think about this.

Yeah. Second and last, the way the macro circumstances are evolving, it seems that we'll see some high inflation after a long time. So just from the past experience, how your consumer, how the user base behaves in terms of AOV or frequency, because they seem to be much more inflation sensitive than,

let's say, the broader market.

Yeah, I think typically if you kind of

look at times like these, and again, there is a fair amount of history from the 70s till kind of now, where value-focused sort of companies actually tend to gain share during times when inflation goes higher because, of course, budgets are tighter for people to cross. So I think... That potentially is a tailwind. Now, of course, there might be a head build in terms of, you know, what is the absolute amount that people are spending, et cetera, and some of these might kind of act in counters of a fashion. So we'll see how this kind of progresses, but high inflationary environments for value-focused players are generally kind of tailwinds for a system. That's all for my pleasure. Thank you.

Thank you. The next question is from the line of Aliyazgar Sheikh Shaki from Motila Losfal Mutual Fund. Please go ahead.

Yeah, thanks for the opportunity. Just wanted to understand the margin in a little more detail.

So, you know, what are your levers for the contribution margin? One, of course, is your, you know, ad revenue. But other than that, I mean, you mentioned that, you know, from all the disruption that happened in Q2 and Q3, you are now at the base. So, are there any more levers on how should we see contribution margin improving from here? You know, in terms of levers more than, you know, the tragedy. And second is below contribution margin. Where do you think are the, you know, relatively lower hanging proofs that can play out in terms of, you know, operating leverage when your growth is strong? Yeah, those are the questions.

So I think when you look at contribution margin, specifically we kind of look at this as a split between two components, which is the ads related sort of margin as well as what we kind of have on the fulfillment side. So on the ads side, like we kind of mentioned as well, we continue to see improvements and that revenue update there would largely kind of flow down into contribution margin. Cost of serving ads is fairly low. From a fulfillment perspective, now if you kind of think about the cost headers there, there are multiple cost headers, you know, it includes things like both the forward cost of serving an order, how many of those orders kind of become failed deliveries, and hence we incur higher cost on those. So as you kind of bring down failed delivery percentage, which typically kind of we do through Various initiatives, right? Some of those we have mentioned in the letter as well. For instance, during the last couple of quarters, we have improved the amount of orders which used to get misrouted because the geographical accuracy of addresses was sort of lower or the kind of partners we were assigning was based in a more aggregated sort of fashion where we made improvements and hence the rate of fail deliveries. has come down, which consequently reduces the cost of serving in Alderman. from delivery transactions, which is kind of as a proportion reducing. So, on and so forth, there are multiple drivers within this cost line item, we obviously aggregated as... Here, the typical trend you would see is, we will keep reducing the cost. Margin structure. I think we've mentioned a few of them in the letter as well, but especially on kind of

This is very useful, just to quick follow-ups. So, below contribution margin, can one assume that, you know, the benefit will be lower in terms of, you know, operating leverage. And at the contribution margin level, I mean, you know, you've seen very sharp improvement in this quarter. From here on, should we believe that, you know, whatever progress you do should benefit, but beyond that, it will be a very slow and gradual heavy lifting. Something that will improve contribution learning.

Yeah, so I think, first of all, on below contribution line items, again, I mean, each of them have different trajectories, so the three large cost line items, below contribution margin, are the new user acquisition investment that we have, which I think, as we mentioned, we decide on the basis of return thresholds, which is any particular percentage of the NMP number. On people cost, I think, generally, we will kind of have an operating leverage come through. Over the course of next few years, again, as the cost growth there will be lower than NMV growth rate. On technology infrastructure investments, apart from the operating leverage, there are also contract cycles. So a large proportion of this cost is in relation to cloud providers. And then we have a certain contract life cycle of two or three years where we kind of renegotiate some of those contracts. And as kind of our scale increases, we start getting larger discounts. So that also comes into the future. And hence, the sort of trajectory may not be specifically...

Got it. And above contribution, if you want to clarify.

Yeah, above contribution margin, you're right. I think some of the more significant transient impacts that we had had kind of done away with those. I think there is still, in addition to ad revenues improving, there is still some scope to increase output payment margins, which might happen over the years. The data in contribution margin would be obviously slower than what has happened between Q3 and Q4. And their improvement would come both from ad revenues improving as well as some...

I got it. This is very useful. Thank you so much for the detailed answer.

Thank you. The next question is from the line of Yashavardhan Agarwal from IFL Capital Asset Management. Please go ahead.

Yeah, I think conversation will be such a number.

Just for clarification, the end of that report is on the basis of the orders that are shared basis instead of the cases. Is that correct?

If you repeat that question, you can hear your voice prayer.

This is on the basis of order SHIB, it's in the order, please.

NMV is on the basis of orders delivered and not returned. So it's not shipped. Basically, GMV is basis number of placed orders and NMV is basis number of delivered orders. And I think we've kind of shared disclosures around this in the data book.

And after that, that number has been 80% for the last few years, so has that been the same in the FI26 region?

Yeah, I think roughly the NMV to GMV ratio has been between 58 to 60% for the last three years. I think for FI26 as well, the number is about 58.8%.

I'm talking about the numbers of orders shipped after returns divided by orders, please. That number has been around 50%.

Orders shipped after returns? I don't think we disclosed these numbers, so I won't be able to.

Okay, I will check it later on. My other question is on the standards edition, especially those who are non-DSC registered. We have been seeing that the standard edition last year has been pretty strong. So how has the return rates been? And if yes, then as a platform, what are we doing to now manage the quality control?

Yeah, so I'll take this question.

So, actually, the quality of sellers, even in non-GST that we acquired, are pretty good. And our systems have been built over the last 10 years that it takes into account how the quality of a new seller onboarded on the platform. If their quality is not that great, they do not get visibility or orders. And products that have very good quality continue to scale on the platform. And the numbers that we share are of people who are active on the platform, which means they're getting sales on the platform. So these are people who have crossed that threshold. So actually, return, et cetera, would not be a problem. We've seen our returns to be quite stable. Every year, actually, we're going to improve in return. So non-GST sellers impacting that metric is not going to happen because we have quite robust systems to take care of it. Now, the reason this number is going fast and I think we'll continue to go at a fast pace is because we've said in the past, if you look at the total number of businesses in India, that these products is tens of millions. And that number used to be some million for us because non-GST sellers were not allowed to sell online. Now that has changed. So we believe there's going to be a big... A big focus for us as a platform, but even a large base of sellers who really want to come online and grow their business, and that will keep reflecting in the growth of these businesses on our platform.

My next question is, John, what would be the average number of STUs per order? And I mean, John, Bazaar is trying to be aggressive here.

By offering shipping C on second unit from the same seller to the same customer, I can see when effectively less than 60 rupees per two STUs. So, what are the views on that and could that be shown in anything?

So the way our platform has been built, it is to kind of ensure that users are kind of placing orders as frictionlessly as possible and kind of hence the number of SKUs per order are pretty close to one or sort of slightly higher than one. From a consolidation perspective, again, in our business, because a lot of these orders are shipped from different sellers and their factories directly to consumers, we have been identifying opportunities of consolidation wherever we can within the supply chain. But these are not warehouse origin kind of orders.

And hence, I think our focus is not so much on increasing sort of STU per order.

Thank you and most wishes.

Thank you. The next question is from the line of Samad Patel from Equira Securities. Please go ahead.

Thanks for providing the opportunity and pundits on a great set of numbers. My first question is on the advertisement comments that you provided. Like, what percentage of our sellers are currently actively spending on advertisement versus, let's say, a total base of 960,000 sellers that we have? And extension of that is, like, given that sellers are ROE sensitive, what is the minimum ROE threshold that needs to be provided to these sellers across categories? So that's the first question.

Sure. I think more than two-thirds of our sellers, when rated by GMV, are active on ads. Having said that, I think, again, an important driver is not just kind of looking at number of sellers active on ads, but also how many products are they advertising on. And that is the core metric that we kind of consider, which I'd mentioned has grown by about 40% YOY. So, again, we continue to see good progress there. From a minimum, the last threshold perspective, I think obviously it varies from category to category, so there's no sort of specific number that we look to solve for. A lot of this is market dynamics driven, margin structure of those categories, etc. And we don't kind of control these numbers and they're more sort of market set. So I'm not able to comment on specific thresholds here.

Understood. That's really helpful. Now, my second question is, Misho Mall NMV is growing really well for us. So now, as you move beyond, let's say, unbranded goods and into from unbranded goods to FMCG and beauty, how does the contribution margin for mall transactions compare versus our core marketplace business?

So I think at this point in time, our focus is not on expanding the contribution margin. So the contribution margin will be lower than the... We'll marketplace because right now in the investment phase, our goal is to onboard a lot more brands, a lot more selection across the country, introduce it to more of our consumers. So since it's in the investment stage, our focus is not on maximizing contribution margin. I think that phase will come when the product has and the business has more matured. And I think that's going to be… The phase for us for the next few years is going to be the investment phase. You want to grow this really fast, make sure that every brand considers Nishamol a critical part of their distribution. And until then, we are not going to focus so much on contribution.

Understood. That's really helpful. My last question is, you have provided good data around user cohorts. Now, similar to that, if you can just, let's say, talk about how just seller cohorts are evolving and is the seller concentration increasing or it's decreasing. So, any flavor around that would be really helpful. Thanks. That's it for myself.

Sure. I think we had provided some of this disclosure as part of our DRHP. In terms of trajectory since then, the concentration on sellers continues to kind of reduce as we have more and more sellers who kind of become active as well as larger on the platform. So that number of sellers who kind of form the Pareto of the platform continues to be It continues to kind of increase at a very rapid pace as well.

Thank you very much. Ladies and gentlemen, we will take that as the last question for today, and we thank everyone for the participation. On behalf of Citi, that concludes this conference. You may now disconnect your lines.