Lenskart's Rs 7,000-crore IPO gets fully subscribed on Day 1; GMP crosses 20%: Should you apply?

Lenskart IPO Day 1

Eye-wear retailer Lenskart's initial public offering (IPO) opened for public bidding today, October 31. The Rs 7,278-crore public issue has been fully subscribed on Day 1.

The maiden public issue of the company received bids for more than 11.23 crore shares, as against the offer size of 9.98 crore shares, according to data on NSE. Retail investors and Qualified Institutional Buyers (QIBs) have fully booked their respective reserved portions (131 percent and 142 percent respectively). Non Institutional Investors (NII) subscribed 41 percent of the portion kept for them.

About Lenskart IPO:

Lenskart has 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. The IPO will remain open for public bidding between October 31 and November 2. At a price band of Rs 382-402 per share, the company seeks a valuation of around Rs 70,000 crore.

Investors can bid for a minimum of 37 shares, requiring an investment of Rs 14,874, and in multiples thereafter. The allotments are likely to be declared on November 5, and the shares are scheduled to be listed on stock exchanges on November 10.

Lenskart IPO GMP:

Ahead of listing, the unlisted shares of the company were trading with 20.15 percent grey market premium (GMP) over the IPO price, according to data on Investorgain. This is higher than the 11.94 percent quoted a day before yesterday.

According to IPO Watch, the unlisted shares of the company were trading with 15.92 percent GMP over the IPO price.

Should you apply?

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. The analyst noted that the decent GMP despite elevated valuations indicates that the market is looking at it more as a technology company which can scale rapidly.

"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.

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

Valuations 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.

Lenskart Anchor Book:

A day before the IPO opened for public bidding, Lenskart announced that it has raised Rs 3,268.4 crore from 147 anchor investors. Several marquee global investors participated in the anchor book including Government of Singapore, T Rowe Price, BlackRock, Goldman Sachs, Fidelity, New World Fund, Nomura, Wellington Management Company, Steadview Capital, Government Pension Fund Global, JP Morgan, Amundi Funds, and Allspring Global Investments.

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