The Viral Joke That Exposed a Serious Market Divide
It all started with a joke. A single, sarcastic post on X (formerly Twitter) that acted as a lightning rod for a storm of debate brewing across Dalal Street. Persistence Capital, an alternative investment fund, quipped about the much-anticipated Lenskart IPO: “We are proud to say that we also skipped this IPO. We will not comment on whether we were approached in the first place.”
The post, a tongue-in-cheek response to a list of funds that had supposedly passed on the anchor allocation, immediately went viral. The fund later clarified the comment was made “in jest,” but the damage—or perhaps, the service—was done. The joke had tapped into a raw nerve among Indian investors, a growing scepticism towards the sky-high valuations of new-age tech companies hitting the primary market.
This single social media incident has ballooned into a microcosm of the larger battle for the soul of the Indian IPO market. On one side, you have the phenomenal growth story of Lenskart, a disruptive omnichannel eyewear brand led by the charismatic and widely recognized founder, Peyush Bansal of Shark Tank India fame. On the other, you have a chorus of seasoned market veterans like Quant Mutual Fund’s Sandeep Tandon and the ever-outspoken Shankar Sharma, who are sounding the alarm bells, calling the proposed valuation nothing short of “stupidity.”
Is the Lenskart IPO the golden ticket to India’s burgeoning consumer story, or is it a repeat of the wealth-destroying tech IPOs of the past? This article will dissect the Lenskart IPO from every angle, providing you with the in-depth analysis needed to make an informed decision. We’ll go beyond the headlines to examine the numbers, unpack the criticisms, explore the bull case, and draw crucial lessons from recent market history.
Decoding Lenskart: More Than Just a Spectacle Seller
Before we can even begin to discuss valuations, it’s crucial to understand the business you might be buying into. Lenskart is not just a chain of optical stores; it’s a vertically integrated eyewear giant that has fundamentally disrupted a traditionally unorganized market in India.
The Business Model: An Omnichannel Powerhouse
Lenskart’s success is built on a powerful omnichannel strategy that seamlessly blends online and offline experiences. Here’s a breakdown of its key operational pillars:
- Online Dominance: The company started as a digital-first platform, leveraging technology for everything from virtual try-ons using Augmented Reality (AR) to precise prescription uploads. This allows them to reach customers in Tier-2 and Tier-3 cities where physical stores might not be viable.
- Vast Offline Network: Lenskart boasts a massive and rapidly expanding network of physical stores across India and Southeast Asia. These are not just sales points but experience centers where customers can get eye check-ups, feel the products, and receive personalized service. This physical presence builds trust and brand recall.
- Vertical Integration: This is Lenskart’s secret sauce. The company designs, manufactures, and retails its own eyewear. By controlling the entire supply chain, it cuts out middlemen, ensuring better quality control and significantly higher margins compared to traditional retailers.
- Global Ambitions: Through its strategic acquisition of Japanese eyewear chain Owndays, Lenskart has firmly established its presence in over 10 Southeast Asian markets, transforming it from an Indian success story into a global contender.
Financial Snapshot: A Look at the Numbers
Unlike many tech startups that listed while bleeding cash, Lenskart has been marching towards profitability. While the official DRHP (Draft Red Herring Prospectus) will provide the most updated figures, recent reports indicate strong financial performance:
- Revenue Growth: The company has demonstrated explosive revenue growth, capitalizing on its market leadership and expansion.
- Path to Profitability: Lenskart has achieved profitability at the consolidated level, a key differentiator that bulls will point to as a sign of a sustainable business model.
- Market Share: It is the undisputed leader in the organized eyewear market in India, a segment that is rapidly growing as consumers shift from unorganized local opticians.
The business itself is robust. The question that vexes the market, however, is not about the quality of the company, but the price of its stock.
The ₹70,000 Crore Question: Is Lenskart’s Valuation Justified?
The controversy surrounding the Lenskart IPO boils down to one thing: its staggering valuation. The company is reportedly seeking a valuation of around ₹70,000 crore (approximately $8.4 billion). Let’s break down the metrics that are causing sleepless nights for value investors.
“I have no interest in Lenskart IPO… I never met Peyush Bansal,” veteran investor Shankar Sharma bluntly told NDTV Profit, dismissing the offer out of hand.
Sharma’s disinterest is rooted in the numbers. The reported valuation pegs Lenskart at:
- Price-to-Sales (P/S) Ratio: Over 10x
- Price-to-Earnings (P/E) Ratio: An eye-watering 230x
What Do These Ratios Mean for You?
For a beginner, these numbers can seem abstract. Let’s simplify them.
A Price-to-Sales (P/S) ratio of 10x means that for every ₹1 of revenue the company earns in a year, investors are being asked to pay ₹10 for its stock. This is a high multiple, typically reserved for hyper-growth software or tech companies with very high gross margins.
A Price-to-Earnings (P/E) ratio of 230x is even more extreme. It means that if you buy the stock at the IPO price, it would take 230 years for the company’s current annual profits to equal your investment, assuming profits remain static. While a high P/E is expected for a growth company, a figure north of 200 is in a territory that demands flawless execution and decades of exponential growth to justify.
Shankar Sharma, in a post on X, compared this pricing to past overheated tech IPOs, suggesting that any criticism is being conveniently brushed aside by vested interests as an “organised campaign.” This sentiment reflects the frustration of many market watchers who feel that fundamentals are being ignored in the IPO frenzy.
The ‘Big Bears’ Roar: A Reality Check from Dalal Street’s Finest
It’s not just one fund’s jest or a single investor’s opinion. A formidable group of market veterans is publicly questioning the IPO mania, with Lenskart as the current poster child.
Sandeep Tandon’s “Stupidity” Warning: A Lesson in Global Valuations
Sandeep Tandon, the founder and CIO of the highly successful Quant Mutual Fund, did not mince his words. In an interview with NDTV Profit, he warned that the IPO mania is being fuelled by pure “stupidity.”
“If the US is not willing to pay these companies this sort of valuation, then why should I pay in India? … This is stupidity on our part that we are giving these companies such a high valuation,” Tandon argued.
His point is profound. He suggests that Indian investors are being asked to pay a premium for companies that would not command similar valuations in more mature markets like the US. He cautions that the risks are “massive,” pointing out a chilling statistic: 60% of stocks listed in the past year are now trading below their IPO price.
Tandon’s analysis is that the IPO market is heavily skewed in favour of sellers. Early-stage investors, venture capitalists, and even the “best brains of the country” are simply cashing out at inflated prices because they know there is immense, often uninformed, retail demand.
The Underlying Fear: A Market Built on Froth?
The collective criticism from figures like Tandon and Sharma points to a dangerous market dynamic. The combination of high liquidity, a booming stock market, and aggressive marketing campaigns can create a bubble in the primary market. Investors, driven by FOMO (Fear Of Missing Out), chase listing gains without scrutinizing the long-term value of the underlying business. This is the very environment where wealth is most often destroyed.
The Bull Case: Why Lenskart Could Still Be a 10-Year Winner
To maintain a balanced perspective, we must also examine the arguments in favour of Lenskart’s premium valuation. The bulls believe that looking at trailing P/E ratios for a company like Lenskart is like driving a car while looking only in the rearview mirror. Their case rests on future potential.
- A Massive, Untapped Market: The Indian eyewear market is estimated to be worth over $10 billion, but the organized sector accounts for a small fraction of it. The vast majority of sales still happen through small, unorganized opticians. Lenskart, as the dominant organized player, has a multi-decade runway for growth simply by converting customers from the unorganized to the organized sector.
- The Technology and Data Moat: Lenskart isn’t just a retailer; it’s a data company. It has collected vast amounts of data on customers’ prescriptions, face shapes, and buying preferences. This data allows for hyper-personalized marketing, better inventory management, and the development of new products, creating a competitive advantage or “moat” that is difficult for others to replicate.
- The Peyush Bansal Factor: The importance of a visionary founder cannot be overstated. Peyush Bansal’s celebrity status, amplified by Shark Tank India, creates immense brand trust and recall. He is the face of the company, and his ability to articulate his vision inspires confidence in employees, customers, and a section of investors.
- Proven Execution and Profitability: Lenskart has a track record of excellent execution. It has scaled its operations at a breathtaking pace while simultaneously achieving profitability. This is a rare feat in the world of venture-backed startups and suggests a management team that is both ambitious and fiscally disciplined.
Bulls would argue that you are not paying 230x for today’s earnings, but a reasonable multiple for the earnings Lenskart is projected to generate 5-7 years from now, by which time it could be a globally dominant eyewear brand.
A Walk Down Memory Lane: Lessons from the IPO Graveyard
History often provides the best lessons. For Indian retail investors, the memory of the 2021 tech IPO boom is still fresh and painful. Several celebrated startups listed at astronomical valuations, only to see their stock prices collapse, wiping out crores of retail wealth.
The Cautionary Tales
- Paytm (One97 Communications): The poster child of IPO wealth destruction. It listed at ₹2,150 and has since cratered, at times falling over 80% from its issue price. The key concerns were its sky-high valuation and a complex, loss-making business model that investors struggled to understand.
- Zomato: While it has seen a recent resurgence, Zomato’s journey has been a rollercoaster. After a blockbuster listing, the stock fell significantly below its IPO price of ₹76, highlighting the market’s impatience with the ‘growth-at-all-costs’ model.
- Nykaa (FSN E-Commerce Ventures): Nykaa listed at a huge premium, but the stock came under immense pressure post the lock-in expiry for pre-IPO investors. This is a crucial risk factor, as a flood of new shares can depress prices. The initial valuation was seen by many as simply too rich, leaving no margin for error.
The common thread? All these companies were market leaders in their respective fields, but they were priced for perfection. When business realities, competitive pressures, or macroeconomic headwinds hit, their stock prices had nowhere to go but down. Lenskart investors must ask: Is the valuation leaving any room for potential missteps?
The Retail Investor’s Playbook: How to Approach the Lenskart IPO
Given the conflicting views, how should a retail investor navigate this high-stakes IPO? It’s not about getting a simple “apply” or “avoid” recommendation. It’s about building a framework for your own decision.
Your Pre-IPO Checklist:
- Read the DRHP: The Draft Red Herring Prospectus is your bible. Pay close attention to the ‘Risk Factors’ section. Look at the financials for the last three years. Understand the ‘Objects of the Offer’ – is the money being raised to grow the business (fresh issue) or to give exits to existing shareholders (Offer For Sale – OFS)? A large OFS component is often a red flag.
- Analyze the Valuation: Don’t just look at the Grey Market Premium (GMP). GMP is an unofficial, often manipulated indicator. Compare Lenskart’s P/E and P/S multiples with listed peers in the retail and consumer discretionary space, like Titan (which has an eyewear division). Ask yourself if the premium is justified by Lenskart’s superior growth prospects.
- Understand Shareholding Structure: Who are the pre-IPO investors selling their shares? If marquee VCs and founders are cashing out a significant portion of their holdings, it could indicate their belief that the stock is fully priced.
- Assess Your Own Risk Appetite: Are you investing for short-term listing gains or as a long-term holder? Applying for listing gains is a high-risk strategy that can backfire spectacularly if the market sentiment turns. Long-term investing requires a deep conviction in the business fundamentals and a willingness to stomach potential volatility.
- Ignore the Noise, Trust Your Research: Social media hype, celebrity endorsements, and sensational news headlines are not investment advice. Do your own homework.
Final Verdict: A Test of Market Maturity
The Lenskart IPO is more than just another public offering. It is a crucial litmus test for the Indian stock market. Will investors reward a proven, profitable, and growing company with a premium valuation, signaling a maturing market that values quality? Or will they push back against what many see as excessive pricing, sending a clear message to promoters and bankers that the days of ‘growth at any price’ are over?
The viral joke by Persistence Capital may have been in jest, but it opened a serious and necessary conversation. For retail investors, the Lenskart IPO is a classic dilemma: a fantastic business story pitted against a frightening valuation. The ultimate decision rests on your individual financial goals, risk tolerance, and belief in the company’s ability to grow into its very expensive shoes.
As the IPO date nears, the debate will only intensify. But by arming yourself with facts, historical context, and a healthy dose of scepticism, you can look past the noise and make a choice that is right for you.
