DSP Mutual Fund Defends Lenskart IPO Investment on Social Media Amidst Investor Backlash

In an unusual move, DSP Mutual Fund took to X, formerly Twitter, to defend its investment decision in Lenskart Solutions' IPO, responding to public backlash and investor questions. The mutual fund house explained its investment strategy, which is based on four pillars: strong and scalable businesses, trustworthy promoters, demonstrated execution, and reasonable valuations. DSP Mutual Fund stated that while achieving all four is challenging, they found the first three dimensions to be in place for Lenskart.

Regarding valuations, the fund acknowledged that new-age industries, particularly e-commerce and retail businesses like Lenskart, often command high valuations. However, they expressed confidence in Lenskart founder Piyush Bansal's ability to build and scale the business. Lenskart reported a total revenue of INR 6,652 crore, with a growth rate of 22.5%. The fund views Lenskart not just as an eyewear retailer but as a scalable business capable of expanding across various cities. In the Financial Year 2025, Lenskart sold 27 million eyewear units through 2,723 stores.

DSP Mutual Fund also highlighted that they exited a slow-growing company to make way for this investment in Lenskart, rather than simply holding cash. This public defense comes as social media buzzed with negative comments regarding the Lenskart IPO, with some netizens expressing distrust, pointing to promoters borrowing money for share purchases and a large 'other income' on the company's Profit and Loss statement.

Despite these concerns, many mutual funds saw growth potential. Twenty-one mutual funds participated in the anchor investor portion, subscribing at INR 402 per share, with SBI Mutual Fund investing INR 100 crore. Other significant participants included HDFC Mutual Fund, ICICI Prudential Mutual Fund, Mirae Asset Management, and Kotak AMC.

However, seven funds, including Parag Parikh Financial Advisory Services, Tata Mutual Fund, Nippon Mutual Fund, and Helios Mutual Fund, opted out. These funds are known for their sensitivity to entry valuations and generally avoid new-age IPOs that lack steady profits or are priced expensively.

Impact This event highlights the growing scrutiny on IPO valuations for new-age tech companies and the increasing transparency mutual funds are adopting, even using social media to communicate investment rationales. It may influence how other funds approach similar high-valuation IPOs and how they manage investor perceptions. Rating: 7/10.

Difficult Terms: IPO (Initial Public Offering): The first time a private company offers shares to the public. Promoters: The founders or individuals who established and control a company. Valuations: The process of determining the current worth of a company. New Age Industries: Businesses that are modern, technology-driven, and often disruptive. E-commerce: The buying and selling of goods or services over the internet. Revenue: The total income generated from sales of goods or services. FY25 (Financial Year 2025): The accounting period from April 1, 2024, to March 31, 2025. P&L (Profit and Loss) statement: A financial report summarizing a company's revenues, expenses, and net profit or loss over a specific period. Anchor portion: A pre-IPO allocation of shares to select institutional investors. Other income: Income derived from sources outside a company's core business operations.