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Lenskart, India's largest homegrown eyewear company, is gearing up for a mega public listing. The company's upcoming IPO has pegged its valuation at an estimated Rs. 70,000 crore, sparking discussion among industry experts.
While the brand's rapid growth and expansion abroad have established it as a category leader, surpassing its competitors, analysts disagree that the 260x P/E multiple indicates long-term prospects. Some argue that it's just speculative optimism.
Lenskart, India's largest eyewear retailer, is pursuing one of the most aggressive IPOs in Indian history, with a valuation of nearly Rs. 70,000 crore. The total offer comprises a fresh issue of Rs. 2,150 crore, along with an offer for sale (OFS) of 127.6 million shares from existing shareholders. With a maximum price of Rs. 402 a share, Lenskart's price-to-earnings multiple would be around 260 times.
Lenskart has expanded its business in India and Southeast Asia through its acquisition of OWNDAYS. Though in FY24, company revenue was over Rs. 6,650 crore, a large part of Lenskart's recent earnings still derives from a one-time gain from the acquisition (167.2 crore non-cash gain). This raises the question of whether Lenskart's earnings are truly sustainable.
Market analysts are divided over whether Lenskart’s growth can justify such an aggressive valuation. Some opined that this growth has the potential to flourish more in the future. However, others are a little cautious about it. Abhinav Tiwari of Bonanza Research stated, “Despite its large scale, Lenskart’s profitability remains weak. A normalised 1.96% net margin on over Rs. 6,650 crore in revenue is concerning, especially when several smaller peers deliver stronger profitability.”
Further, he continues his concerns, saying, “The Rs. 69,726 crore valuation appears difficult to justify against a Rs. 130 crore normalised profit, implying that much of the optimism is already priced in.”
Many other analysts, including Brokerage Swastika, echo similar concerns in the IPO report, calling the IPO “extremely demanding with minimal margin for error.”
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The Indian eyewear industry is predicted to grow at a 13% CAGR until FY2030. This definitely presents a prime opportunity, with nearly 70% of this sector still unorganized. Lenskart’s focus on scale and brand is impactful, but it still poses questions of profitability.
Investors must decide whether the long-term story can live up to the short-term hype. While a group of them finds the valuation justified, the contradictory opinions are also equally significant. If competition heats up and their margins stay stuck, the Rs. 70,000 crore vision could ultimately lose its focus.
