The highly anticipated Lenskart IPO is facing a dramatic turn of events as the grey market premium (GMP) plummets to zero, erasing all the pre-debut hype. But why the sudden change in investor sentiment?
Lenskart, an eyewear retailer, was gearing up for a stellar market debut on Monday, with GMP reaching Rs 108, suggesting a potential 25% listing pop. However, the tables have turned, leaving investors puzzled. The IPO, consisting of a fresh issue and an offer for sale, attracted substantial interest, with overall subscriptions reaching 28 times and bids totaling almost Rs 1 lakh crore. Institutional investors led the charge, with the QIB portion subscribed 45 times.
Here's where it gets controversial: Despite the impressive subscription numbers, valuation concerns have crept in. At the upper end of the price band, Lenskart's FY25 EV/EBITDA multiple is a staggering 50x, significantly higher than its listed peers in the consumer and retail sectors. This has raised eyebrows, especially with brokerage Ambit Capital issuing a 'Sell' rating, citing high valuations and modest returns.
Ambit's analysis highlights a potential overvaluation, with Lenskart trading at a premium to peers despite lower profitability. This has likely contributed to the GMP's decline. While Lenskart boasts impressive revenue growth, with a 32.5% increase in FY25, its profit is not as promising. A significant portion of its FY25 profit stems from a one-time gain related to an acquisition, and the adjusted profit reveals a slim net margin.
And this is the part most investors are pondering: Is Lenskart's short-term outlook truly muted? Analysts believe that the company's long-term prospects remain attractive, given its dominance in India's eyewear market and omnichannel approach. However, the immediate future looks uncertain, and a flat listing could indicate a shift in investor sentiment.
So, will Lenskart's IPO story end with a whimper or a bang? The answer lies in the eyes of the investors and the market's reaction on Monday. What's your take on this unexpected twist? Do you think Lenskart's long-term potential justifies the current valuation concerns?
