Lenskart’s IPO is raising eyebrows with a 70,000 crore valuation and an eye-popping 235 PE ratio. When asked, “What value is left for new investors?” CEO Peyush Bansal said, “We create value for customers, not shareholders.” But social media erupted in criticism. Investors question if the stock’s sky-high price reflects real growth, especially after Bansal bought back shares at a ₹8,700 crore valuation months ago.
This situation surrounding Lenskart’s IPO is a major topic of debate, with criticism centering on the sky-high valuation and perceived lack of value for new public investors.
Here is a breakdown of the key points driving the controversy, based on your information and market reports:
1. 📈 Excessive Valuation Metrics
- ₹70,000 Crore Valuation: Critics question if this massive valuation is justified for an eyewear retail company, comparing it unfavorably to the overall size of the Indian eyewear market.
- 235 Price-to-Earnings (P/E) Ratio: A P/E of 235 is extremely high, suggesting that investors are pricing in several years of exponential future growth. This is the primary trigger for the “sky-high price” concern, as it indicates the stock is very expensive relative to its current profits.
- Note: Reports suggest the profit in the most recent fiscal year was heavily influenced by one-time, non-operating gains, making the valuation appear even steeper when adjusting for core earnings.
2. 💬 CEO’s “Customer Value” Comment
CEO Peyush Bansal’s direct quote, “We create value for customers, not shareholders,” has fueled the social media and investor backlash.
- Investor Concern: In the context of an IPO, this statement is seen as dismissive of public market expectations, where the primary goal of the issue is to provide returns and value to shareholders.
- Social Media Criticism: Bansal, known for grilling founders on valuation on the show Shark Tank India, has been widely trolled. Critics argue he is applying a double standard, being valuation-conscious as an investor but dismissive as a founder listing his own company.
3. ⏱️ Valuation Discrepancy and Founder Gains
Investors are highly skeptical of the rapid increase in the company’s valuation right before the IPO:
- Recent Share Buyback: The fact that Bansal bought back shares months ago at a significantly lower valuation (around ₹8,700 crore) and is now listing the company at ₹70,000 crore (an approximately 8x jump) suggests an immense windfall for existing promoters and early investors, but leaves little margin of safety or immediate value for new public investors.
- Offer for Sale (OFS): A significant portion of the IPO is an Offer for Sale, where existing shareholders (including promoters and early investors) sell their shares and pocket the proceeds, rather than the money going entirely into the company for growth. This is viewed by some as an “exit” opportunity for early backers at the expense of retail investors.
The core of the criticism is that Lenskart is seeking an IPO price that has already priced in several years of potential growth, making it an “expensive bet” where the biggest gains have already been locked in by the founders and early investors.
Would you like to know more about the financial performance Lenskart is using to justify this valuation, such as their revenue growth or profitability history?