Lenskart IPO Stuns Dalal Street: Shares Plunge 11%, Then Skyrocket! What's Next for This Unicorn?

Lenskart's IPO Debut Performance: The consumer-tech major Lenskart experienced a turbulent debut on Monday. Shares opened at a discount of 1.7% to 3% compared to its IPO price of Rs 420. Early trading saw a significant plunge of 11.5%, pushing the stock down. However, a strong recovery followed, allowing the shares to end the trading day in positive territory. On the National Stock Exchange (NSE), Lenskart closed at Rs 404.55, and on the Bombay Stock Exchange (BSE), it settled at Rs 403.30. This resulted in an impressive intra-day swing of 14.5% from its lowest point to the day's close. Approximately ₹5,593 crore worth of Lenskart shares were traded, with the majority (Rs 5,221.7 crore) occurring on the NSE.

Company Vision and Valuation: Co-founder and CEO Peyush Bansal shared a vision of reaching people across India, from Delhi to smaller towns, rather than solely focusing on valuation. The company's Initial Public Offering (IPO) garnered substantial interest, being oversubscribed by more than 48 times. Lenskart's valuation stands at 235 times its FY25 earnings, a figure that incorporates its expansion plans in AI-linked products and services.

Market Potential and Growth Drivers: Lenskart operates 2,806 stores globally. The global eyewear market is projected to grow at a Compound Annual Growth Rate (CAGR) of 4% by FY30, reaching Rs 15,207 billion in FY25. India's market, however, is expected to experience a much higher growth rate of 13%. Key growth drivers for Lenskart include rising myopia prevalence (affecting 50% of urban youth) and the increasing urban population. Challenges include unorganised competition and a supply chain dependency on China imports (40%), as noted by brokerages like Nirmal Bang and Deven Choksey.

Peer Landscape and Investor Interest: Lenskart is the first among recent unicorn IPOs to list, with others like Groww, Physics Wallah, and Pine Labs anticipated. Upcoming IPOs from Meesho and Fractal.ai are also on the horizon. The IPO saw strong demand from Non-Institutional Investors (NIIs), who bid over 65.4 times for their portion. Anchor investors, including Government of Singapore (GIC), T Rowe Price, BlackRock, Fidelity, Goldman Sachs, Nomura, and JP Morgan, invested ₹3,268.36 crore. Pre-IPO investments were made by SBI Mutual Fund schemes (Rs 100 crore) and Radhakishan Damani (around Rs 90 crore) at Rs 402 per share.

Use of Funds: Lenskart plans to utilize the IPO proceeds for store expansion, technology and cloud infrastructure upgrades, marketing initiatives, and potential inorganic growth.

Underwriting Banks: Kotak Mahindra, Morgan Stanley India, Avendus Capital, Citigroup Global Markets, Axis Capital, and Intensive Fiscal were involved in assisting the IPO process.

Impact: This news significantly impacts the Indian stock market by influencing investor sentiment towards technology and unicorn IPOs. It highlights the volatility associated with high-growth stock debuts and provides insights into the potential of the Indian consumer tech sector. The performance of Lenskart's IPO can affect future investment decisions in similar companies. Impact Rating: 7/10.

Difficult Terms Explained: - Debut: The first time shares of a company are traded on a stock exchange after its Initial Public Offering (IPO). - Discount: When shares are listed on the stock exchange at a price lower than their IPO issue price. - Plunge: A sudden, sharp drop in the price of a stock. - Recouped: Recovered lost ground; the stock price increased after an initial fall. - End in green: A stock closes the trading day at a higher price than its opening price or the previous day's closing price. - IPO (Initial Public Offering): The process where a private company first offers its shares to the public, becoming a publicly traded company. - Upper-band: The highest price in the price range set by a company for its IPO, used to determine the final IPO price. - BSE (Bombay Stock Exchange): One of India's oldest stock exchanges. - NSE (National Stock Exchange): India's largest stock exchange. - Intra-day swing: The difference between the highest and lowest price of a stock during a single trading day. - Valuation: The estimated worth of a company. - FY25 earnings: The company's profit during the financial year 2024-2025. - CAGR (Compound Annual Growth Rate): The average annual growth rate of an investment over a specified period, assuming profits are reinvested. - Omnichannel experience: A seamless shopping experience across various channels, such as online, mobile, and physical stores. - Myopia: Nearsightedness, a vision condition where distant objects appear blurry. - Unorganised competition: Competition from small, informal businesses that are not part of the formal economy. - Unicorn: A privately held startup company valued at over $1 billion. - Brokerage: A firm that buys and sells stocks and other securities on behalf of clients. - Non-Institutional Investors (NII): Investors who bid for shares worth more than Rs 10 lakh in an IPO, typically high-net-worth individuals and companies. - Anchor investors: Institutional investors who commit to buying shares in an IPO before the public offering begins. - Pre-IPO transaction: A sale of shares in a company before it has gone public. - Promoters: The founders or initial owners of a company who retain significant control. - IPO proceeds: The funds raised by a company through an IPO. - Inorganic growth: Growth achieved through acquisitions or mergers rather than organic expansion. - Underwriting: The process where investment banks help companies issue new securities and guarantee their sale.