Lenskart IPO Sees Massive Demand Despite Valuation Concerns
Lenskart's IPO Attracts Attention
The recent IPO of Lenskart has sparked significant discussion among investors, primarily due to its high valuation. Allegations have surfaced against founder Piyush Bansal regarding potential manipulation of this valuation. Several financial influencers have advised investors to steer clear of this IPO. However, the overwhelming response from investors has effectively dismissed these claims. The issue, valued at ₹7,278 crores, was subscribed 28 times, with bids received for 281 crores of shares, far exceeding the 9.97 crore shares the company intended to issue. The total amount of bids surpassed ₹1 lakh crores.
Strong Demand Surpasses Expectations
These figures indicate that the demand for the shares far exceeded the company's expectations. The share price was set between ₹382 and ₹402, and at the upper price band, investors placed bids totaling approximately ₹1.1 lakh crores. The allotment of Lenskart shares is anticipated on November 6, with the listing date expected to be November 10.
Institutional Investors Drive Success
A significant factor behind this remarkable success has been the participation of institutional investors. Both foreign and domestic large funds showed robust interest, with their subscriptions reaching nearly 40 times. Despite some analysts warning that the company's valuation is excessively high and predicting limited profit potential post-listing, investor confidence remains anchored in Lenskart's long-term growth narrative.
Anchor Investors Boost Confidence
The company has already attracted several major mutual funds and global investors as anchor investors, signaling strong interest in the IPO. Lenskart has established itself as a leader in India's organized eyewear market, with significant growth potential still available in this sector. Additionally, the company is expanding its presence internationally, particularly in the Middle East and Southeast Asia, further bolstering investor confidence.
Retail Investors Show Trust
The subscription rate in this category reached approximately 18 times, while retail investors also participated with bids nearly 7 times the available shares. This indicates that smaller investors are placing their trust in the brand, even though the share price appears high.
Valuation Discussions Continue
On the other hand, the company's valuation at the upper price band is estimated at around ₹70,000 crores, reflecting a P/E ratio of 230 based on its FY25 profits. This suggests that investors would need to invest ₹230 to earn ₹1, which is generally considered a high P/E ratio. In FY25, the company reported revenues of ₹6,652 crores with a profit of ₹297 crores, a significant portion of which stemmed from a one-time gain from acquiring the Japanese brand Owndays. Excluding this gain, the company's actual profit is closer to ₹130 crores, significantly reducing its profit margin.
Current GMP Insights
As for the grey market premium, it stood at ₹39 on November 5. If this trend continues, investors could see a 9.70% gain on the first day of listing. The GMP was ₹58 on November 4, ₹70 on November 3, and peaked at ₹94 on November 1. It is evident that as the listing date approaches, the GMP is declining. On October 28, Lenskart's GMP reached its highest at ₹109.