According to analysts, rather than present profitability, Lenskart's IPO valuation reflects high expectations of future growth and margin improvement. As a result, numerous brokerages offer ratings ranging from "Neutral" to "Subscribe for long-term."
Lenskart IPO: The ₹7,278 crore IPO of eyewear retailer Lenskart Solutions, which launched and closed on Friday, has generated a lot of excitement on social media and in financial circles for aiming for valuations of up to ₹70,000 crore.The IPO for Lenskart, helmed by Shark Tank judge Peyush Bansal, is valued at ₹69,742 crore and is priced between ₹382 and ₹402 per share. The IPO consists of an offer to sell 127.6 million shares and a fresh share sale of ₹2,150 crore.
Given that the company only became profitable a year ago and that the majority of its profits are driven by accounting changes, the valuation of ₹402 per share suggests a severe 260x earnings multiple. As a result, Lenskart is among the priciest listings in India's online marketplace.
Why do analysts worry about the values of Lenskart?
Why do analysts worry about the values of Lenskart?
Strong revenue growth and the company's swing to profitability are key points of contention for its backers. However, a ₹167.2 crore non-cash gain from the Owndays acquisition is included in Lenskart's stated net profit of ₹297 crore for FY25.
When this one-time item is removed, the normalized profit drops to ₹130.1 crore, yielding a small net margin of 1.96% as opposed to the reported 4.24%.
"Lenskart's profitability is still low despite its size. It is alarming to see a normalized 1.96% net margin on nearly ₹6,650 crore in revenue, particularly since a number of smaller competitors show higher profitability. The ₹69,726 crore valuation looks tough to sustain against a ₹130 crore normalised profit, signaling that most of the optimism is already priced in," said Abhinav Tiwari, Research Analyst at Bonanza.
Furthermore, Tiwari claimed that investors are given an artificially exaggerated profit by failing to account for one-time gains, which makes the value seem less costly than it actually is.
Furthermore, Tiwari claimed that investors are given an artificially exaggerated profit by failing to account for one-time gains, which makes the value seem less costly than it actually is.
According to analysts, rather than present profitability, Lenskart's IPO valuation reflects high expectations of future growth and margin improvement.
The present valuations at a PE of more than 200 times are "extremely demanding with minimal margin for error," according to Brokerage Swastika's IPO report. So, it gave the IPO a 'neutral' rating in spite of strong business fundamentals.
According to Harshal Dasani, Business Head at INVAsset PM, the company's omni-channel approach, private-label supremacy, and global development give it legitimate growth levers, as evidenced by the strong increase in revenues and the lowering of losses in FY24. To achieve such high pricing, he noted, it will be essential to maintain 30–40% revenue growth while increasing margins in a cutthroat eyeglass market.
The present valuations at a PE of more than 200 times are "extremely demanding with minimal margin for error," according to Brokerage Swastika's IPO report. So, it gave the IPO a 'neutral' rating in spite of strong business fundamentals.
According to Harshal Dasani, Business Head at INVAsset PM, the company's omni-channel approach, private-label supremacy, and global development give it legitimate growth levers, as evidenced by the strong increase in revenues and the lowering of losses in FY24. To achieve such high pricing, he noted, it will be essential to maintain 30–40% revenue growth while increasing margins in a cutthroat eyeglass market.
By the Financial Year 2030, the Indian eyeglasses market is expected to grow at a rate of about 13% CAGR, reaching ₹1,483 billion ($17.2 billion). Furthermore, as of the Financial Year 2025, 70% of prescription eyeglasses in India are being marketed through unorganized channels. Additionally, compared to other industrialized nations, there is still little market demand for the same.
According to Religare Broking, given the current financials, a reasonable P/E range of 40–60x would be more justified.
According to Tiwari, there are still hazards beyond valuation issues. For example, promoters are selling shares worth Rs. 1,100 cr through the OFS, which suggests that there is limited short-term confidence and a chance to liquidate holdings at high values.
According to Religare Broking, given the current financials, a reasonable P/E range of 40–60x would be more justified.
According to Tiwari, there are still hazards beyond valuation issues. For example, promoters are selling shares worth Rs. 1,100 cr through the OFS, which suggests that there is limited short-term confidence and a chance to liquidate holdings at high values.
Peyush Bansal, the founder and CEO, increased his ownership in Lenskart from 9.3% to 10.3% in July when he bought 17 million shares at ₹52 apiece. He is currently selling 20.4 million shares, nevertheless.
All things considered, it is important to highlight that the business has solid investment support thanks to the arrival of seasoned investor Radhakishan Damani. According to Swastika, this boosts market confidence and trustworthiness.
The Street is still interested in Lenskart's IPO despite the debates surrounding its IPO values because it was booked more than 1.1 times on the first day. The Lenskart IPO is currently trading at a 24% premium on the unofficial gray market.
All things considered, it is important to highlight that the business has solid investment support thanks to the arrival of seasoned investor Radhakishan Damani. According to Swastika, this boosts market confidence and trustworthiness.
The Street is still interested in Lenskart's IPO despite the debates surrounding its IPO values because it was booked more than 1.1 times on the first day. The Lenskart IPO is currently trading at a 24% premium on the unofficial gray market.
Will there be an upside in Lenskart shares after listing?
Analysts are doubtful about further potential for the company in the near future, unless profitability rises more quickly than anticipated, even while valuation worries persist.
"In the medium run, investors who place bets on Lenskart are essentially supporting the company's transformation from a rapidly expanding retailer into a globally recognized consumer brand that generates revenue. Whether ₹70,000 crore represents a fair premium or the upper bound of optimism will be determined by the company's next phase, Dasani stated.
For long-term investors, a correction following Lenskart's IPO listing may be more profitable, according to market analyst Ajit Mishra, whose Religare Broking has a "neutral" call on the IPO as well.
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