Lenskart Stock Listing: Shares Struggle on D-Street Post-IPO – Key Insights for Investors
On its debut day on the stock market, Lenskart’s shares fell short of the high expectations surrounding its initial public offering (IPO). The stock opened at ₹390 on the National Stock Exchange (NSE), which was a 3% drop from its issue price of ₹402. This lackluster performance disappointed many investors, especially considering Lenskart’s reputation as one of India’s leading consumer-tech companies. The eyewear platform entered the market with a valuation of approximately ₹70,000 crore, but its grey market premium plummeted from ₹108 to zero just before listing, indicating a significant shift in investor sentiment.
Valuation Concerns Impacting Investor Sentiment
Lenskart’s valuation raised eyebrows among analysts and investors alike. At the upper end of its price band, the company was valued at 10.1 times FY25 EV/Sales and 68.7 times EV/EBITDA, as estimated by SBI Securities. These figures positioned Lenskart ahead of established retail giants like Titan and Nykaa. SBI Securities had previously warned that the company’s valuation appeared stretched, predicting muted listing gains. Despite this, they acknowledged Lenskart’s potential as a long-term player in the eyewear market, which remains underpenetrated in India. Conversely, Ambit Capital took a more pessimistic view, initiating coverage with a ‘Sell’ recommendation and setting a target price of ₹337, suggesting a 16% downside from the issue price. They cited concerns over the company’s capital efficiency and the need for substantial investments to scale operations, which could constrain free cash flows until FY28.
Profitability Challenges Ahead
Lenskart reported a profit of ₹297 crore for FY25, a notable increase from a loss of ₹64 crore two years prior. However, a significant portion of this profit stemmed from a one-time gain related to the acquisition of Owndays, which accounted for ₹167 crore. This adjustment reduced the adjusted profit to approximately ₹130 crore, resulting in a slim margin of just 1.9%. In the first quarter of FY26, Lenskart achieved a profit of ₹55.6 crore on revenues of ₹1,940 crore, improving margins to 2.8%. While these figures indicate progress, analysts have expressed concerns about the sustainability of profitability, emphasizing that it remains heavily reliant on achieving scale efficiencies. Despite a robust revenue growth rate of 32.5% CAGR from FY23 to FY25, the lack of corresponding margin expansion raises questions for investors seeking consistent long-term growth.
Shifting Market Dynamics
Although Lenskart’s IPO was met with strong demand, being oversubscribed 28 times overall and 45 times in the institutional category, the mood in the secondary market shifted by the time of its listing. Traders noted a growing caution towards tech and digital economy stocks, particularly those priced at high valuations in a market that was already near its peak. One analyst remarked that while Lenskart has established a strong brand and omnichannel presence, the market’s expectations were perhaps too high. The company’s debut performance serves as a reminder that even well-regarded firms can falter when market conditions change. Despite the initial setback, Lenskart retains its status as India’s largest eyewear retailer and has expanded its reach internationally through Owndays. The company’s future performance will hinge on its ability to demonstrate sustainable profitability in the coming quarters, as investors remain watchful for signs of recovery or further challenges ahead.
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