Lenskart IPO GMP falls to 2% before market debut on Monday; should you buy, sell or hold?

Lenskart IPO GMP declines

The grey market estimates for the maiden public issue of Lenskart sharply declined on November 7, a day before the shares of the eye-wear retailer made its much-awaited debut on stock markets.

This comes despite the Rs 7,278-crore IPO seeing strong investor interest during its three days of public bidding, being subscribed more than 28 times its offer size between October 31 and November 4.

Lenskart IPO GMP:

Ahead of listing, the unlisted shares of the company were trading with around 2.5 percent grey market premium (GMP) over the IPO price, according to data on Investorgain. This is lower than the 7.46 percent GMP quoted by the site earlier yesterday, and 24 percent GMP quoted on the day the IPO opened for public bidding (October 31).

According to IPO Watch, the unlisted shares of the company were trading with more than 6 percent GMP over the IPO price.

About Lenskart IPO:

Lenskart had launched its IPO to raise Rs 7,278 crore through a fresh issue of shares worth Rs 2,150 crore, and an offer for sale of 12.75 crore shares. At a price band of Rs 382-402 per share, the company seeks a valuation of around Rs 70,000 crore.

Investors could bid for a minimum of 37 shares, requiring an investment of Rs 14,874, and in multiples thereafter.

Valuation concerns:

Several analysts have noted that the company is seeking a significantly high valuation, which implies a profit to earnings (P/E) ratio of 230. Lenskart CEO Peyush Bansal was asked during an interview with CNBC-TV18 about the company's valuation. Even if the company triples its profits over the new few years, it will still have a P/E ratio of 70, which is still considered to be expensive, the news channel said, while asking how much value was left for the investors aiming to invest in the company now.

Bansal highlighted the company's 90 percent EBITDA CAGR and the long-term growth potential of the eyewear market.

"As a company and as an entrepreneur, our job is to create value for the customer. Yeah, right now, increasingly for the shareholder as well. And as far as valuation is concerned, it's what the market decides," he told CNBC-TV18.

What analysts say?

At the upper price band, Lenskart trades at over 230-times its trailing earnings, presenting a high bar for execution, said Harshal Dasani, Business Head, INVasset PMS. "From a strategic standpoint, success will depend on maintaining growth in Tier 2/3 markets, scaling internationally, and converting brand strength into repeat purchase frequency. For investors, the IPO offers access to a scaled consumer platform—but the premium pay-up demands sustained delivery rather than short-term listing excitement," he added.

Shivani Nyati, Head of Wealth at Swastika Investmart, had a ‘Neutral’ rating for the IPO due to its stretched valuations, despite solid business fundamentals.

"With a possible valuation of close to Rs 70,000 crore, the omni-channel reach and aggressive international expansion are obvious differentiators. But what investors will have to examine is sustainability whether its unit economics and margins are able to endure increasing operational costs and international competition. While the eyewear segment provides India's under-penetrated optical market with long-term growth opportunities, sustained profitability and capital prudence will decide if Lenskart matures from a high-growth startup into a sustainable listed business," said Siddharth Maurya, Founder & Managing Director at Vibhavangal Anukulakara.

The Lenskart IPO, with backing from marquee investors and a strong brand, has seen high market interest, said Shravan Shetty, Managing Director at Primus Partners.

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