With Lenskart Solutions Limited set to become public, the Indian market has been abuzz with expectations that it is going to be the first pure-play eyewear opportunity the equity market has ever witnessed. Following 19 funding rounds that raised more than 1 billion dollars, Lenskart IPO is not another listing, it is a new case study on the markets. The company seeks to create new capital and offer an exit to its initial investors, but the biggest question is, does the business really look the part? This in-depth analysis of Lenskart will cover the business model that is unique to Lenskart, its market positioning and the information behind its much hyped IPO.

 Realizing what Lenskart has as a Unique Advantage

Lenskart, which is the brainchild of Peyush Bansal, was established in 2010 in a different manner. Although a well-known online player, it is essentially an offline retailer in India and around the world, with a multi-layered sales approach. The advantage of Lenskart is that it is vertically integrated, i.e. it includes all the processes of design and production, as well as sales within itself. This gives Lenskart a very strong cost edge since the end-to-end control eliminates the middlemen markups that can add 2.5-4 times markups to prices.

At scale, Lenskart can afford to pay 35-50% less than most competitors on frames and lenses with 27.2 million units of eyewear sold in FY25. This production efficiency has enabled the business to retain close to 70% gross margin on its products and manufacturing facilities in Gurugram, Bhiwadi, Singapore, the UAE and a joint venture in China. This integration is flexible besides margins. Eyewear is a medical requirement and also fashionable. The design and manufacturing allows Lenskart to react quickly to trends, introduce new products and build strong customer loyalty, as indicated by more than 98 percent of customers returning to make repeat purchases after two years.

This integration is flexible in addition to margins

Eyewear is a fashion as well as a medical need. The ability to control the design and manufacturing has enabled Lenskart to respond quickly to trends, launch new products and create customer loyalty as over 98% of customers have been able to make repeat purchases within two-years. This robust business base seats Lenskart as it seeks global market share with 656 stores operating outside India and aggressively acquiring existing players in particular foreign markets. The eventual goal is to be similar to global eyewear market leader EssilorLuxottica that has 20% of the world market share.

Monopoly and Unrealized Potential

Lenskart is an eyewear company that already enjoys a market leader status in the Indian organized eyewear market with an estimated share of 25-40. This IPO provides the investors with a unique first-mover opportunity to invest in the eyewear industry in India which is not offered by other listed companies such as Titan Company Ltd, which deals mainly with jewellery. Lenskart has a powerful management and operating cash flows with 1.27 times EBITDA.

This IPO is very timely, especially in the context of the market. The eyewear market in India is expected to reach a value of ₹78,800 crore in 2025 and expand at a healthy rate of 13.5 percent per year. Prescription spectacles represent a dominant 70 percent of this market segment, a rapidly growing category as eye health in India continues to decline, and within five years, 62 percent of the population likely will experience vision problems. In order to capture this massive growth, Lenskart started with a franchise model.

But currently, the company is also changing its focus to more company-owned, company-operated (CoCo) stores, with the help of AI and remote optometry to reach more locations. The move is to abandon the headache of the disputed franchisee relationship. The ability of Lenskart to integrate technology as a first-mover, in conjunction with its high market standing, is indeed a strong case.

The IPO: Securities, Finances and risk

Lenskart Solutions Limited submitted its Draft Red Herring Prospectus (DRHP) to SEBI. The IPO includes a new issue of shares value 2150 crores (about 250 million dollars). The amount of the IPO is likely to be much larger, between $750 million and 1 billion or 8,000-8,500 crore, inclusive of an Offer to Sale (OFS) by the current investors. The promoters, i.e., Peyush Bansal, Neha Bansal, Amit Chaudhary, and Sumeet Kapahi, and the institutional investors, i.e., SoftBank, Alpha Wave, Kedaara Capital, TR Capital, Chiratae, Schroders Capital Private Equity Asia Mauritius, PI Opportunities Fund -II, and Macritchie Investments are likely to divest some of their interests.

The net proceeds of the fresh issue will be used in a number of strategic initiatives:

● Establishing new Company owned, Company operated (CoCo) stores in India.

 ● CoCo stores lease/rent/license related payments.

● Investment in technology and cloud infrastructure.

● Marketing of the brand and advertisement of the business to create brand awareness.

● Unknown inorganic acquisitions.

● General corporate purposes.

Along with its advantages, there is a range of risk factors that potential investors should take into account:

● Great reliance on China as a source of components and production via its joint venture, Baofeng Framekart.

● Clustering of operations in the Gurugram-Bhiwadi region, which exposes it to local shocks.

 ● Volatility and seasonal demand and exchange rate fluctuations because it operates across the world. ● The large investments to expand and to market might affect profitability in the short term.

● Rigorous competition between the unorganized local players and the rogue Direct-to-Consumer (D2C) brands.

● Operations and financial management issues of its independent franchise stores.

● Depending on third-party contractual work in the manufacturing process.

● Continuing need to acquire and renew statutory and regulatory licenses.

The Road Ahead

The company has already transformed into a public limited company preparatory to the listing. Co-founder and CEO Peyush Bansal has also been proactively purchasing back stakes of current investors prior to the IPO, with the company being reportedly valued to the tune of 7-8 billion at the time of negotiations.

 An updated ESOP plan is also presented that has reserved the options to eligible employees, and information about co-founder compensation is presented. A syndicate of book-running lead managers including Kotak Mahindra Capital Company, Morgan Stanley India Company, Avendus Capital, Citigroup Global Markets India, Axis Capital, and Intensive Fiscal Services are the IPO managers, and Universal Capital Securities Private Limited is the Registrar.

Lenskart can exploit this trend as the optical retail market in India is still undergoing the transition phase of unorganized market structure to more structured and organized environment. It remains to be seen whether it will reach its dream of being the EssilorLuxottica of the East but this IPO will certainly open the next chapter of the ambitious development history of Lenskart. To make sound decisions, investors will have to assess the growth exhibited by the company and its journey to profitability against the risks associated with scaling and its dependence on the world market.