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Kolkata: The Lenskart Solutions IPO was subscribed 28.27 times overall -- 7.56 times in the retail category, 40.36 times in QIB (ex anchor) category and 18.23 times in the NII category. While some analysts raised valuation concerns about this public issue, Ambit Capital has generated a "Sell" call with a target price of Rs 337, which is at 16% discount to the issue price of Rs 402.
The entire stance of Ambit Capital has been triggered by the opinion that the share is very highly priced for now. The brokerage admitted that the gompany has a robust growth but still the free cash flow could remain negative until FY28 due to heavy capital expenditure. In a sense, this is quite a setback for a public issue where the shares are yet to be listed.
The gray market premium or GMP of Lenskart PO as plummeted too. It can send signals of concern for investors. It came down from Rs 107 on October 28 to Rs 39 on November 4 (the last fay of bidding) and now to Rs 16 on October 8. It now indicates a listing gain of only 3.98%.
Ambit Capital has pointed out that Lenskart's revenue will grow at around 20% between FY25 and FY28 and that operating (EBITDA) margins could also rise by 6.30 percentage points. But the company is slated for high capex -- about Rs 2,000 crore -- in the next three years. The average capacity utilization for factories in this sector is 80%, while that of Lenskart is only 65%. Ambit has forecast that it could take Lenskart until FY28 to become cash flow positive.
The agency has also said that Lenskart's valuation is very high compared to others. Its business in India is trading at 55 times FY28 EV/EBITDA, while comparable firms such as Trent and Nykaa are 15–30% cheaper. On the other hand, Lenskart's return on capital employed (RoCE) is 9%, compared to 35–40% for peers.
However, SBI Securities and Nirmal Bang have assigned "Subscribe" rating for the long term to Lenskart. They have said that its brand value, online and offline network and rising profitability warrants it. SBI Securities thinks listing gains could be modest but it has robust growth opportunities in the long term. The listing will take place on November 10.
(Disclaimer: This article is only meant to provide information. TV9 does not recommend buying or selling shares or subscriptions of any IPO, Mutual Funds, precious metals, commodity, REITs, INVITs, any form of alternative investment instruments and crypto assets.)
