The company’s stock market debut happened at a small discount to its issue price, despite the bullish momentum in the market.
Almost immediately after listing, the stock was hit with a wave of selling, and the price dropped more than 10% intraday.
Then came the intraday recovery from the lows. The stock rallied over 12% to end day one in the green but only marginally.
All this after the IPO was much-hyped and oversubscribed 28.3 times, including 7.5 times retail, and 40.4 times qualified institutional buyer (QIB). In short, it was a victim of its own hype.
Since listing, the stock has risen marginally. At the time of writing, it was trading at ₹412 compared to the issue price of ₹402.
Lenskart Share Price – Since Listing
Source: Equitymaster
But what about the future of the stock?
In this editorial, we will consider the pros and cons of investing in the stock of Lenskart.
Read on…
Pros
#1 Strong Market Position
Lenskart Solutions has a dominant position in India’s eyewear retail market.
It has a hybrid omni-channel business model that combines a vast physical store network along with a strong digital presence that appeals to the younger generation.
Also, unlike many retail players, Lenskart Solutions owns the entire value chain from design and manufacturing to retail. This gives it control over the supply chain to an extent.
Lenskart has, over the years, transformed into a formidable business in the eyewear sector and has positioned itself for long-term growth.
The company’s high-growth retail expansion and technology-driven customer personalisation, makes it a promising candidate in the consumer lifestyle sector.
#2 Delivering on Growth
The company has delivered on revenue growth. In FY25, the company’s revenue was up 22.5%.
The business model and brand value of Lenskart are the sources of the company’s steady growth over the years. The growth rate is not extraordinary but it’s quite good as long as it can be sustained.
In FY25, the company also reported a net profit of ₹2,97.3 crore. However, this was buoyed by ‘other income’, excluding which the company was still in the red at the operating level.
Cons
#1 Profitability Needs to be Established
Lenskart turned profitable in FY25, but it was largely due to the other income.
Even if the company were to turn profitable from an operational point of view in FY26, the bottomline would still be positive only by a small amount compared to the revenue.
In other words, the company’s net profit margin would need to improve significantly before investors can be confident that the company can deliver sustainable net profit growth.
And for long-term investors, a company’s long-term net profit growth is the most important factor in earning good stock market returns.
#2 High Valuations
The company’s PE ratio, at the IPO upper price band, was around 230, which was very high.
After the IPO, at the time of writing, the stock is trading even higher.
No matter how good the fundamentals of a business may be, investors should always pay close attention to the valuations of the stock.
About Lenskart
Lenskart Solutions is well-known as a vertically integrated eyewear retailer that designs, manufactures, and retails eyeglasses, sunglasses, and contact lenses.
It leverages technology such as 3D try-on for a seamless shopping experience. The company was founded in 2010 (as Lenskart.com brand) and is headquartered in Gurugram, India.
Lenskart Solutions started as an online business (was selling contact lenses initially) and later added full eyewear and offline stores.
Happy Investing.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com