Lenskart's IPO Fizzles: Grey Market Premium Plummets Ahead of Monday's Debut
The highly anticipated initial public offering (IPO) of Lenskart Solutions has hit a snag, with its grey market premium (GMP) crashing to zero just days before its market debut. This sudden drop in GMP, which had previously peaked at Rs 108, signaling a potential listing pop of over 25%, has dampened the excitement surrounding the company's much-awaited entry into the stock market.
Lenskart's IPO, valued at a staggering Rs 7,278 crore, was initially expected to be a blockbuster, with strong subscription from institutional investors. The QIB portion was subscribed 45 times, and the overall response was decent at 28 times, attracting bids worth nearly Rs 1 lakh crore. However, the market's enthusiasm seems to have cooled down due to concerns over valuation.
At the upper end of the price band, Lenskart's IPO valued the company at a steep FY25 EV/EBITDA multiple of over 50x, which has raised eyebrows among investors. This valuation is significantly higher than that of established listed peers in the consumer and retail space. Adding to the pressure, brokerage firm Ambit Capital initiated coverage with a 'Sell' rating, citing stretched valuations and modest return ratios.
Despite the company's impressive topline growth, with revenues rising 32.5% to Rs 6,653 crore in FY25, a significant portion of its profit came from a one-time gain linked to the Owndays acquisition. Adjusted for this, the normalized profit drops to Rs 130 crore, translating to a net margin of just 1.96%.
Analysts suggest that while Lenskart's long-term prospects remain promising, driven by its leadership in India's underpenetrated eyewear market and omnichannel strategy, the short-term outlook is less favorable. If the stock lists flat, it would indicate a cooling of sentiment, but long-term investors might still see potential in the company's structural growth opportunities within India's expanding eyewear and optical retail market.
