Lenskart IPO Sees Strong Demand Despite Stretched Valuations: Investors Bet On 'Zomato-Like' Growth

Despite a brewing social media storm that is attacking Lenskart Solutions Ltd. for its expensive valuations, the eyewear brand is seeing strong subscription for its Rs 7,000 crore-plus initial public offering on the back of a strong grey market premium and high-growth prospects.

"Institutions are looking at Lenskart the same way they looked at IPOs like Zomato, PB Fintech and Nykaa," said Deven R Choksey, founder and managing director of DRChoksey FinServ, a boutique fund and wealth management company. He said that institutional funds have a "natural demand" for including consumer technology companies in their portfolios, and Lenskart, despite valuation concerns, fits well into addressing that demand.

Lenskart has set a price band between Rs 382 and Rs 402, which values the company at nearly Rs 70,000 crore at the upper end. The price band implies a valuation premium, with a reported price-to-earnings ratio near 285 times based on the company’s Rs 297 crore profit in FY25.

"Though the valuation is expensive, the company is getting investors on the basis of strong growth it promises," Chokesy explained. This growth expectation is driven by a promised non-linear increase in client acquisitions and international expansion. Sustaining profit growth to support the valuation remains a key metric for observation, he added.

At the time of publishing, Lenskart's offer had demands 1.8 times higher than the shares on offer, with retail investors bidding for nearly 3 times more shares than they are being offered. Institutions too, have bid 1.6 times against their quota, while non-institutional investors have placed bid 1.5 times their share.

Pranav Haldea, managing director of PRIME Database Group, stated that the subscription numbers act as the definitive measure of investor appetite. "Clearly, there are enough willing buyers who are willing to buy at this price," he observed. "The valuation seems to working for them despite concerns expressed on social media," he said.

Haldea pointed to a lack of direct listed peers for benchmarking, confirming that the company’s self-determined price is attracting demand. Retail investors, for their part, are primarily monitoring the so-called grey market premium for potential listing gains, taking participation cues from the institutional segment, he added.

The grey market premium for the Lenskart Solutions IPO was Rs 57 apiece, as of 11:00 a.m. on Monday. With a price band of Rs 402, the estimated listing price is Rs 459, implying an expected listing gain of 14.18% per share. This marks a decrease compared to Friday, when the GMP stood at Rs 95, indicating nearly 24% potential returns.

Meanwhile, Arun Kejriwal, founder at Kejriwal Research & Investment Services, said that the retail subscription does not paint a full picture of investor demand in Lenskart's case. "The portion for retail investors in the IPO is capped at 10% of the issue. A two- or three-times demand number might thus look big, but its not necessarily reflective of demand."

He also said that the company has a business with strong visibility and higher sales than competing eyewear brands, and that investors should not be worried about valuation metrics. "The company's vision to enable one billion customers by 2027 is a very reachable and doable goal. But we need to wait and watch if that translates to profitability," he explained.

The pricing reflects a "very perfect scenario" for Lenskart's future performance, Aakash Agarwal, head of digital and new-age business at Anand Rathi Investment Banking said. He projected a Zomato-like trajectory over a five-to-ten year horizon. Agarwal also noted the simultaneous market entry of several new-age companies, indicating that a general IPO momentum is likely contributing to the subscription volume.

Around 22 mutual fund houses and asset management companies have been allotted shares in the pre-IPO anchor round, which has turned into a buzzword in the markets. New World Fund got the highest allocation of 3.82%. While T. Rowe Price International Discovery Fund got the second highest allotment of 3.11%, SBI Focused Fund got 3.06% stake in the company.

Twenty-one domestic mutual funds have applied through 59 schemes, the eyewear firm said in an exchange filing on Thursday. They have collectively netted 35.34% of the anchor portion. SBI, Kotak, ICICI Prudential, HDFC and Axis were among the major fund houses in this category.