'We Like Their Business Even If Valuations Are...': DSP Mutual Fund Defends Lenskart IPO Investment

DSP Mutual Fund has defended its decision to invest in Lenskart’s initial public offering after facing criticism on social media and several investors over the eyewear retailer’s valuation.

The fund house said it usually does not comment on individual stocks, but decided to clarify after questions and concerns were raised online about its participation in the IPO’s anchor allotment. Several users on X criticised the offer price and called for boycotts of mutual funds that bought shares in the issue.

In a post on X, DSP said it remains disciplined in its approach to IPOs and invests only when it has conviction across four factors — a strong and scalable business, trustworthy promoters, demonstrated execution, and valuations. “It is rare to find all four perfectly aligned at the same time. In the case of Lenskart, we like the first three very much,” DSP said. “On valuations, we believe businesses associated with retail and e-commerce are trading expensive, including this specific business.”

The fund said it does not usually hold cash in most of its portfolios and made the investment by trimming a slower-growing, similarly expensive position. It added that it sizes positions carefully when valuations are stretched. “There is nothing new in our approach while evaluating Lenskart,” DSP said, adding that it will share more detailed thoughts in its annual letter.

Lenskart’s IPO was fully subscribed on its opening day, with bids reaching 1.13 times the total shares on offer as of 5 p.m. The qualified institutional buyers’ portion was subscribed 1.42 times, retail investors 1.31 times, and the employee category 1.10 times. Non-institutional investors subscribed 41% of their quota. The IPO closes on Nov. 4.

The eyewear retailer’s listing is one of the most anticipated in the consumer internet space this year, drawing both interest and scrutiny from investors over its pricing and growth prospects.