The current IPO wave is not just hectic in terms of the sheer volume of it but has thrown up some interesting pricing and interesting trends. One of the big questions and red flags for many market observers is the valuation. The Lenskart IPO too has thrown up some valuation concerns. A quick look at the valuation based on trailing numbers translates into a price-to-earnings ratio of over 230 times. This is more than 10 times its sales. The big question is can it deliver a listing pop to the investors or slide sharply below the issue price on listing?
As the street readies for the listing of the Rs 7,278.76 crore Lenskart issue, FinancialExpress.com spoke to a host of market observers, analysts and experts on how they expect the issue to list and long-term prospects.
Will Lenskart IPO deliver a shock or surprise on listing day?
Here is a quick recap of what the top market voices have to say, in terms of their expectation from Lenskart –
Lenskart- ‘No position is also a position’
Celebrated investor and market veteran Vijay Kedia pointed out that “Lenskart’s valuations look quite expensive to me, and I’m not a buyer at any price. If I don’t buy and the price goes up, one thing will happen, I’ll miss making money. But I don’t mind losing such an opportunity. I prefer to stay away from money that comes with high risk, as it can change one’s investing mindset. I’m happy to live with that regret. Remember, no position is also a position.”
Gauging the ideal value of Lenskart
One of the very well-known fund managers and an industry veteran, Sandip Sabharwal of Asksandipsabharwal.com said, “The value of the Lenskart stock is not more than 25% of offer price. That’s where it should ultimately settle. However, in terms of timing, it is uncertain.”
Lenskart overpriced, don’t rule out panic selling
Market veteran Ambareesh Baliga believes that “Lenskart is overpriced and overhyped – so in the short term anything is possible – it could open at a premium because the stakes are high, especially reputation risk, but sustaining it could be difficult. In case it opens at a discount, we could see some panic selling. A longer-term view will be based on the earnings in the next few quarters. As of now it’s an expensive stock from an investment perspective.
Lenskart- Big listing premium unlikely
Another respected voice in market circles, Deven Choksey, Managing Director of DRChoksey FinServ rules out a listing premium, “I don’t think we are looking for a big premium on listing. As long as it sustains the price at which it has issued the shares, I think that would be a good achievement as far as the company is concerned. Now the next level of price rise will happen only when the company shows the sustainability and improvement in the profits. Up till now they have had only one year for profit so far. So certainly I think the investor who bought it at a higher valuation will definitely demand the profit first before they increase the valuation. At current levels, it is an excessive valuation.”
Lenskart- All eyes on profitability over long-term
Sunny Agrawal – Head of Fundamental Research, SBI Securities also reiterated the focus on long-term profitability, “I feel that maybe for next one to two years, at least the valuations are discounting the next two-year story. In case the company is able to surpass that expectation and clock consistent rise in profitability, then in the long run, definitely value can be created, or vice versa. So, everything is a function of profitability. But looking at the way the business model has been created, it looks like the company can deliver good profitability going forward. Let’s see how things shape up.”
Lenskart- Near-term pressure likely, future represents opportunity
Kavita Vempalli, Sr Research Analyst – Nirmal Bang Retail Research believes that given the current broader market condition and “amidst IPO congestion, Lenskart might have a flattish to marginal listing gain of 5-7%. The long-term view is positive on the back of its omnichannel growth strategy, strong expansion plans and its backward-integrated centralised manufacturing facilities. In the near term, given premium valuations, the stock might be under pressure. Long-term investors can use the opportunity to accumulate the stock.”
The Lenskart IPO was subscribed 28.27 times. While most analysts have raised concerns about the current valuations, they believe the earnings going forward are going to be crucial. The retail eyewear major’s consistency in delivering profit in subsequent quarters is what the street is watching out for now. All eyes on the listing on November 10.