Since the last couple of weeks all the market and investors are talking about is this one Peyush Bansal spectacle. The Lenskart IPO.
And we don’t blame the analysts and trade pundits for pulling out all the guns and whistles for this one. It is one of the biggest and most followed IPOs in the last few years. With a valuation of over Rs 70,000 cr, the IPO has become the talk of the town. From being called ‘a clear vision’ to being panned as ‘an optical illusion’, the IPO has seen it all even before it came to life.
But the question is, would a smart investor buy into this IPO.
Would Warren Buffett, the Oracle of Omaha, the world’s most successful investor, put his money in it, or for that matter in any other IPO? You see, unlike the average investor, Buffett had a very clear way of doing things. So, how many IPOs did he invest in?
Here is how many he invested in and why the number is what it is…
ZERO IPOs bought in 70 Years
“We haven’t bought an initial public offering. I haven’t, Charlie (Munger) hasn’t… I think since 1955.”
No declaration better summarizes Buffett’s lifelong distaste for IPOs, than a 2019 admission during a CNBC interview covering the Lyft and Uber IPOs. This is exactly what he said. The statement is not just an anecdote; it is practical proof of disciplined abstinence for 7 decades. The last IPO he invested in was Ford in 1955.
So, let this sink in. Between 1955 and 2025, a total of 70 years, the U.S. stock market has seen over 12,000 traditional IPOs. None of them could entice Buffett and his late partner Charlie Munger. Do you think this is a coincidence? We think it’s not. It’s conviction. Buffett’s company Berkshire Hathaway deployed more than $300 billion of permanent capital across decades. But all of it targeted only established businesses trading at sensible valuations. Not once did it go towards newly minted public entities priced for perfection.
Coming to our domestic IPO market, and Lenskart, the total market size of the eyewear industry in India for 2024, was about US$ 6.6bn (As per custommarketinsights.com). LensKart IPO is valued over US$ 8bn, which clearly fails the “fair valuation” test Buffett had in place.
Is it really a win-win?
“Too often, an IPO, not profits, is the primary goal of a company’s promoters. At bottom, the ‘business model’ for these companies has been the old-fashioned chain letter, for which many fee-hungry investment bankers acted as eager postmen”
This gem comes from a 2000 Berkshire Hathaway shareholder letter and hits a very pertinent nail right on its head. And mind you this was written when the dot-com mania was going full throttle. A time when many practised restraint, but Buffett with this chain-letter analogy exposed a structural truth that even today remains uncomfortably relevant.
The mechanics behind this is not very complicated.
Promoters, venture capitalists, and investment banks organize IPOs with the aim to extract maximum value at one precise moment – when the narrative momentum is at its peak. Actual profitability becomes secondary to the ability to build a story compelling enough to attract the next list of buyers. And what happens when that chain breaks? Well, public shareholders inherit the wreckage. Remember the PayTM fiasco?
Did you buy a lottery ticket?
“You don’t have to really worry about what’s really going on in IPOs. People win lotteries every day but there’s no reason to let that affect your investing strategy at all… You don’t want to get into a stupid game just because it’s available.”
This one was delivered to 40,000 shareholders at the 2016 Berkshire annual meeting. A comparison that transformed IPO participation into the financial equivalent of purchasing lottery tickets. The metaphor’s power lies in its critical accuracy.
And this wasn’t just Buffett’s intuition. Academic studies corroborated Buffett on this. Research from the University of Florida covering 1970–2020, reveals that IPOs underperform industry benchmarks by an average of 18% in their first three years. First-day highs, do not signal strength.
Early investors are ‘locked-up’ and aren’t allowed to sell their shares for a few months. When that time limit expires, they all dump their shares at once, ‘flooding’ the market. With way more sellers than buyers, and eventually this makes the price drop.
So, while LensKart might be right now looking like the next big thing with grey market premiums are soaring, it could all be one big post lock up correction away from behaving like a house of cards on a windy day.
It’s a seller’s market, after all
“The one big thing to remember about IPOs is that they are run for the benefit of the sellers, not the buyers.”
Repeated across Buffett’s 2016 shareholder letter and a few subsequent CNBC appearances, this one quote decodes decades of his observation into a single binding law. Every structural element of the IPO process – pricing committees, overallotment options, directed share programs, exists only to maximise proceeds for pre-IPO shareholders and their financial intermediaries.
Reports reveal how big this insider wealth building can get. In the first 10 months of 2024, investment bankers earned over Rs 1,500 cr from 62 IPOs. That is compensation secured upfront, with no regard for post-listing performance or long-term shareholder returns.
Add to this a comprehensive study conducted for 144 IPOs listed between April 2021 and December 2023. The study found that 54% of allotted shares (excluding anchors) were flipped by investors within one week of listing. This behaviour is driven by fast-profit seekers, rather than committed owners and it highlights the lack of confidence from those closest to the process.
Lenskart’s IPO structure amplifies these concerns. The Rs 7,278 cr issue comprises a modest Rs 2,150 cr fresh capital raise alongside a dominant Rs 5,128 cr Offer for Sale. That is 70% of the total, allowing PE investors like SoftBank, Kedaara, Temasek, and Alpha Wave to offload significant portions for liquidity. Promoters, including Peyush Bansal, divest a smaller slice (reducing promoter group holding from 19.9% to 17.7%).
A Game of Timing, Not Necessarily in Your Favour
“An IPO is like a negotiated transaction. The seller chooses when to come public, and it’s unlikely to be a time that’s favorable to you.”
Buffett’s 2019 observation regarding timing asymmetry fits perfectly in India’s seasonally influenced market. Companies calibrate their listings for periods that have elevated sentiments. Like the post-Union Budget rallies, the Diwali Muhurat optimism, or the pre-election euphoria. They find the right one and stick to it.
And it is this deliberate timing that ensures maximum proceeds go towards the sellers while buyers are exposed to future potential setbacks.
Lenskart’s listing will likely target similar windows. Probably even capitalising on consumption recovery narratives or digital India momentum. Yet India’s eyewear penetration remains below 20%, with growth contingent on rural expansion and affordability initiatives. Entering public markets at cyclical highs would grow promoter wealth while potentially weighing down retail investors.
Conclusion: Clear Vision or Optical Illusion?
Warren Buffett’s seventy-year IPO avoidance goes beyond strategy. It represents a carefully tested framework that has outperformed speculative alternatives across market cycles. While Indian investors pursued Zomato, Nykaa, and Paytm at listing only to experience subsequent 50–80% drawdowns, followers of Buffett’s discipline preserved capital for better and bigger opportunities.
In India, where unicorns are celebrated for speed to public markets, Buffett reminds us that true champions win by refusing to enter rigged contests. For Lenskart stakeholders, the choice between transient liquidity and generational wealth creation has never been more consequential.
The purpose of this article is only to share interesting charts, data points, and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Suhel Khan has been a passionate follower of the markets for over a decade. During this period, he was an integral part of a leading Equity Research organisation based in Mumbai as the Head of Sales & Marketing. Presently, he is spending most of his time dissecting the investments and strategies of the Super Investors of India.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article.
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