Lenskart Solutions is all set to launch its Rs 7,278 crore IPO. The issue will be opening for subscription on October 31 and will close on November 4. However, there are a few risks investors need to keep in mind before the subscription starts.
Lenskart IPO: The big China factor
The company sources a large portion of its raw materials and frames from China. It also operates a manufacturing facility in China through Baofeng Framekart Technology, a Joint Venture. Baofeng Framekart Technology was incorporated in February 2018. It is engaged in the business of production and sale of spectacle lenses, spectacle frames and accessories, and import and export of goods and technology. Lenskart Solutions holds 51% of Baofeng Framekart Technology.
In FY25, the company’s total direct imports from China stood at Rs 1,06,243.3 crore, or 42.2% of total purchases.
Lenskart IPO: Notice by the Enforcement Directorate (ED)
The Directorate of Enforcement, Gurugram, has initiated an inquiry into procedural delays in filings on the IDPMS and EPDMS portals by a show-cause notice dated July 25, 2022, for import-export transactions. The notice included information on bank accounts, business profile, pending exports without realisation, outstanding advance export proceeds, pending outward remittances, and imports with delayed payments. In connection with this ongoing matter, the company has responded to notice and subsequent summons and Promoter, Neha Bansal, has made appearances before the ED, on behalf of the company. However, the matter is currently pending.
Lenskart IPO: Impact of raw material costs, supply chain disruption
The cost of raw materials consumed makes a significant portion of the company’s expenses. The raw materials amounted to Rs 1,62,297.4 crore, or 25% of total expenses in FY25. If there is any delay, interruption, or reduction in the supply of raw materials, or fluctuation in their prices, it could adversely affect the company’s business and cash flows.
Lenskart IPO: Concentration risks in manufacturing facilities
The company’s reliance on manufacturing facilities located in the Gurugram industrial cluster (Bhiwadi and Gurugram facilities) exposes it to concentration risks across production and logistics. Any slowdowns, breakdowns, or shutdowns at any of the company’s manufacturing facilities could affect its business.