If you have ever seen a Shark Tank episode, one question that judges often pose to the aspiring new entrepreneurs is the valuation of their businesses. Well, the tables have turned for one of the erstwhile Shark Tank judges—Peyush Bansal. Yes, you guessed it right—we are discussing the Lenskart IPO pricing and what the valuations mean for retail investors. The street is now questioning the rationale.
As Lenskart Solutions readies to launch the IPO tomorrow, October 31, the company is seeking a valuation of Rs 70,000 crores in terms of market capitalisation. Now, this valuation is based on trailing numbers. This translates into a price-to-earnings ratio of over 230 times and more than 10 times its sales.
Lenskart IPO: Peyush Bansal on valuation
Justifying the pricing, Peyush Bansal, Founder of Lenskart, in an interview with CNBC-TV18, stated that his job is to create value for customers, and valuation can be taken care of by the market.
“I would say that, firstly, as a company and as an entrepreneur, our job is to create value for the customer. As far as the valuation is concerned, it is what the market decides. Even if we look at the valuation, there are investors who are selling shares, there are investors who are coming in, and they have done a lot of work to arrive at these numbers.”
Further elaborating on the calculations during his interview with CNBC-TV18, Bansal added, “All I can say is they’ll be very close to comparables; they won’t be off. Sometimes, when you look at things without looking at the full perspective, they look different, but rest assured that everything will be in line with what it should be. I don’t expect anything abnormal.”
Abhishek Gupta, Chief Financial Officer (CFO) of Lenskart, justified the valuation, saying that as a ‘tech company’, when the operating leverage starts kicking in, the bottom line grows much faster than the revenue growth.
The EBITDA growth CAGR over the last 3 years has been over 90%. There has been operating leverage, which has kicked in.
Lenskart IPO: How the street is reading the valuation
The question that comes to the fore is whether this is enough to convince investors.
SBI Securities, in an IPO note, said that the “valuation of Lenskart seems to be stretched, and hence listing gains are likely to be muted. At the upper band of Rs 402, the IPO is valued at FY25 EV/Sales and EV/EBITDA multiples of 10.1x and 68.7x, respectively, based on post-issue capital.”
One of the very well-known fund managers and an industry veteran, Sandip Sabharwal of Asksandipsabharwal.com said that “It’s not a business that offers massive scale or growth potential, and the company just turned profitable last year, just before the IPO.
They have tried to create positivity by getting some large, reputable investors into the pre-IPO. However, the valuation of the company above Rs 15,000 crores is not justifiable.”
Speaking to Financialexpress.com on the issue, Sunny Agrawal – Head of Fundamental Research, SBI Securities added that the profitability going forward will be crucial, “No doubt the business model is fairly strong; the company has made solid on-ground progress. However, at the current price, it is ideal for those looking at long-term plays in the retail eyewear manufacturing-to-consumer platform. Going forward, the key metrics to track will be the ability of the business to scale its profitability in line with its international peers.”
Lenskart IPO: A look at financials
As per the DRHP details, the company turned profitable in FY25, posting a net profit of Rs 297 crore, compared with a loss of Rs 101 crore in FY24. The EBITDA margins too saw significant improvement, rising to 14.60% in FY25 from 12.38% in FY24.
Lenskart IPO: About the issue
Lenskart will mop up Rs 7,278.02 crore from the primary markets through a combination of 5.35 crore fresh issue amounting to Rs 2,150 crores and an offer for sale of 12.76 crore shares aggregating to Rs 5,128.02 crores. The company set the price band from Rs 382 to Rs 402 per equity share.
The IPO opens for subscription on October 31 and closes on November 04. The allotment for the IPO is expected to be finalised on November 06, while the listing on the exchanges, BSE and NSE, is likely to be on November 10, as per the tentative schedule.